Bills Digest no. 73 2007–08
Financial Sector Legislation Amendment (Review of
Prudential Decisions) Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Financial implications
Main provisions
Concluding comments
Contact officer and copyright details
Passage history
Financial Sector Legislation
Amendment (Review of Prudential Decisions) Bill
2008
Date introduced: 13 February 2008
House: Senate
Portfolio: Treasury
Commencement:
On Royal Assent unless
stated otherwise in the Table under section 2 of the
Bill.[1]
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Financial
Sector Legislation Amendment (Review of Prudential Decisions) Bill
2008 (the Bill) is an omnibus bill which amends the following Acts,
collectively called prudential Acts :[2]
- Banking Act 1959 (the Banking Act)
- Insurance Act 1973 (the Insurance Act)
- Life Insurance Act 1995 (the Life
Insurance Act), and
- Superannuation Industry (Supervision) Act
1993 (the SIS Act),
as well as the Retirement Savings Accounts
Act 1997 (the RSA Act) and the Financial Sector
(Collection of Data) Act 2001 (the FSCODA Act).
The Bill proposes to introduce various measures to improve
the:
- efficiency, transparency and consistency of the process for
disqualifying individuals from operating financial sector entities,
and
- accountability of regulators, such as the Australian Prudential
Regulation Authority (APRA),[3] that make administrative decisions under the legislation
specified above.[4]
The proposed amendments include:
- the creation of a court-based disqualification process for
individuals relating to APRA-regulated entities
- streamlining APRA s (and in certain cases, the Commissioner of
Taxation s) direction powers to provide greater flexibility and
consistency
- removal of Ministerial consent for certain decisions made by
APRA (and in certain cases, the Commissioner of Taxation), and
- widening the availability of merits review of certain decisions
made by APRA (and in certain cases, the Commissioner of
Taxation).
In some cases, those proposed amendments relate
to decisions and powers of the Commissioner of Taxation.
On 12 October 2005, the Prime Minister and the Federal Treasurer
(at the time) announced the establishment of a taskforce charged
with exploring the nature of the compliance burden on business from
government regulation, and where appropriate, suggesting practical
options for lessening the regulatory compliance burden on
business.
The subsequent report released in April 2006,
Rethinking Regulation Report of the Taskforce on Reducing
Regulatory Burdens on Business (the Rethinking Regulation
Report), was informed by the views of stakeholders representing
industry, small business, consumers and the Australian
Government.[5] The
Rethinking Regulation Report identified areas where regulatory
reform might provide efficiency gains to businesses both in the
short and long term.
On 15 August 2006, the Government announced its
final response to the Rethinking Regulation Report, accepting
all of the recommendations in relation to prudential
regulation.
Subsequently, the Assistant Treasurer (at the time), the Hon.
Peter Dutton MP, released a proposal paper,
Streamlining Prudential Regulation: Response to Rethinking
Regulation Proposals Paper December 2006 (the 2006
consultation paper), which detailed the government s
further proposed response to the Rethinking Regulation
Report.
On 16 April 2007, the Treasurer (at the time), the Hon. Peter
Costello MP, announced that the Government would consider and
consult further on certain measures in response to its 2006
consultation paper.[6]
The 2006 consultation paper proposed streamlining prudential
regulation for authorised deposit-taking institutions (ADIs),
general and life insurers, as well as superannuation funds. Those
proposals were made in response to reports by the Commonwealth
Government s Taskforce on Reducing the Regulatory Burdens on
Business[7] and the
HIH Royal Commission.[8]
The measures that the Government proposed in 2007 focussed on
industry concerns about the way that APRA s administrative
decisions were reviewed.[9] These concerns included:[10]
- inconsistencies between the regulator-based disqualification
processes under the various prudential Acts and the court-based
disqualification process in the Corporations Act 2001 (the
Corporations Act)
- how APRA s discretion to decide that a decision is not subject
to a merits review would be implemented, and
- the possible consequences of reducing external scrutiny for
initial prudential decision-making.
On 31 May 2007, Treasury released a further consultation paper
(the 2007 consultation paper) proposing:[11]
- a court-based disqualification of responsible officers
- application of a merits review of APRA decisions, and
- removal of the ministerial consent requirement for APRA
decisions that do not involve broader policy issues.
The Bill was introduced into Parliament on 13 September 2007,
but was not debated before Parliament was prorogued on 15 October
2007.
On 13 February 2008, Senator the Hon. Joe Ludwig reintroduced
the 2007 Bill with amendments, often (though not solely) due to the
commencement of relevant provisions in the Financial Sector
Legislation Amendment (Simplifying Regulation and Review) Act
2007.[12]
The Senate Standing Committee for the Scrutiny of Bills (the
Committee) reviewed both the 2007 Bill and the current Bill. Its
report on the current Bill was tabled on 12 March 2008.[13]
The main concern of the Committee centred on the proposed
provisions that create strict liability offences. The relevant part
of the Committee s reported stated:
The Committee notes that the explanatory
memorandum (paragraphs 1.16 to 1.19 and 2.20) seeks to justify the
creation of these strict liability offences on the basis that they
are offences for non-compliance with basic regulatory requirements
that should be complied with by all persons and that the use of
offences of strict liability is designed to enhance the
effectiveness of the enforcement regime in deterring contravention
of key prudential requirements.
In its Sixth Report of 2002, the
Committee acknowledged that strict liability may be appropriate
where it is necessary to ensure the integrity of a regulatory
regime, however, it also indicated that strict liability should
only be introduced after careful consideration on a case-by-case
basis of all the available options, rather than by applying a rigid
formula. The Committee is of the view that the justification
provided in the explanatory memorandum for the imposition of strict
liability appears to be a generic one, which fails to demonstrate
that consideration has been given to its application on a
case-by-case basis.
The Committee seeks the Treasurer s
advice whether consideration was given to the Guide
to Framing Commonwealth Offences, Civil
Penalties and Enforcement Powers in the framing of each of
these provisions.
Pending the Treasurer s advice, the Committee
draws Senators attention to the provisions, as they may be
considered to trespass unduly on personal rights and liberties, in
breach of principle 1(a)(i) of the Committee s terms of
reference.
The key issues relating to this Bill are, in
general, set out in each Schedule of the Bill:
- replacing a process of disqualification by APRA with a
court-ordered disqualification process (Schedule 1
of the Bill)
- streamlining APRA s powers to give directions across various
prudential legislation, as well as the Commissioner of Taxation s
powers to give directions in relation to the SIS Act
(Schedule 2 of the Bill)
- removing the requirement of ministerial consent for decisions
made by APRA and the Commissioner of Taxation that do not involve
wider policy considerations (Schedule 3 of the
Bill), and
- expanding the scope of merits review for certain decisions made
by APRA and the Commissioner of Taxation (Schedule
4 of the Bill).
The primary rationale for each key issue is:
- court-ordered disqualification to introduce a more flexible,
yet consistent disqualification regime
- directions powers to increase consistency, and certainty of
those powers, as well as which of those powers would be subject to
merits review, whilst ensuring APRA (and in certain cases, the
Commissioner of Taxation) is able to make decisions quickly
- removing ministerial consent to enhance APRA s (and in certain
cases, the Commissioner of Taxation s) operational independence, as
well as ensuring timeliness of the supervisory process, and
- merits review to increase consistency, transparency and
accountability of APRA (and in certain cases, the Commissioner of
Taxation).
Submissions to the 2006 consultation paper
reflect stakeholders concerns regarding transparency and
accountability of the prudential decision-making process.[14]
Court-ordered disqualification, along the lines of the
Corporations Act was generally supported by major
stakeholders.[15]
Although some stakeholders generally support streamlining APRA s
directions powers across prudential legislation,[16] several concerns have been
expressed by stakeholders, for example, proposed wording such as
considers that and has reason to believe may result in subjective
decision making by APRA that would be difficult to
challenge.[17]
Concerns have been expressed by some stakeholders that removing
ministerial consent has the potential to reduce accountability of
the decision maker, as well as reducing consumer confidence in the
prudential regime.[18]
Some stakeholders support proposals as to what types of
decisions would merits review apply and to clarify the bases on
which merits review occurs.[19] In particular, support is expressed in relation
to legislation specifying what decisions will be subject to merit
review, thereby obviating the possibility of APRA using its
discretion to decide on that question.[20]
However, concerns have been expressed about wide ranging powers
given to APRA without merits review being available, as well as the
bases upon which an APRA decision will be subject to merits
review.[21]
The Government states that there are no significant financial
implications resulting from this Bill.[22]
However, as some of the amendments relate to the introduction of
court-based disqualification, one could expect some reasonably
significant financial implications, for example:
- the Federal Court of Australia would have to expend additional
amounts of money to set up and manage these additional
proceedings
- regulators such as APRA and the ATO would incur expenses in
changing their procedures to accommodate these changes
- court proceedings are traditionally more expensive for parties
to the proceedings (of which APRA or the ATO could be one) than
administrative decision-making, and
- case management processes in courts generally involve longer
periods of time for matters to be finalised this could result in
greater financial disadvantage for affected parties, such as
financial loss resulting from damage to reputation.
The Government states that there would be a low compliance cost
impact as the provisions in this Bill simplify processes and affect
only a small part of the financial industry.[23]
As the Bill contains many provisions proposing amendments to
several Acts, this Digest does not address all provisions in the
Bill.
Given the size of the Bill, please note that the Explanatory
Memorandum to the Bill contains comparison tables within each
Chapter, which set out comparisons between old and proposed laws
pertinent to the Bill and may assist readers.
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This Part of the Bill proposes amendments to the following Acts
in relation to courts power of disqualification of people from
responsible officer roles in APRA related entities:
- Banking Act
- Insurance Act
- Life Insurance Act
- SIS Act, and
- RSA Act.
These proposed amendments commence on Royal
Assent and purport to replace an APRA-determined disqualification
process with a court-based disqualification process.[24]
The main amendments are contained in item
7 of Schedule 1 of the Bill. These
propose to substitute existing sections 21 and 22
of the Act currently giving APRA the power to disqualify a person
or determine that a person is not a disqualified person, with
proposed sections 21 and 22 which
will, instead, empower the Federal Court, on application by APRA to
disqualify a person, as well as revoke or vary a disqualification
respectively.
Current subsection 21(1) of the
Act provides that APRA has discretion to disqualify a person from
being or acting as a:[25]
- director or senior manager of an ADI (unless it is a foreign
ADI)
- senior manager of Australian operations of a foreign ADI,
or
- director or senior manager of an authorised non-operating
holding company (NOHC),
if APRA is satisfied that such person is not a
fit and proper person to act in those capacities. When making such
a decision, APRA may consider matters specified in the regulations
or any other matter that APRA considers to be relevant.[26]
Proposed section 21 provides
that the Federal Court has the discretion to disqualify a person
from the following positions:[27]
a director or senior manager of:
(i) a particular ADI; or
(ii) a class of ADIs; or
(iii) any ADI;
(other than a particular foreign ADI, a class of
foreign ADIs
or any foreign ADI);
(b) a senior manager of the Australian operations
of:
(i) a particular foreign ADI; or
(ii) a class of foreign ADIs; or
(iii) any foreign ADI;
(c) a director or senior manager of:
(i) a particular authorised NOHC; or
(ii) a class of authorised NOHCs; or
(iii) any authorised NOHC;
(d) an auditor of:
(i) a particular ADI or a particular authorised
NOHC; or
(ii) a class of ADIs or a class of authorised
NOHCs; or
(iii) any ADI or any authorised NOHC,
The grounds on which the Court may decide to disqualify a person
under proposed section 21 include those found in the existing
provisions notably that the person is not a fit and proper person .
In deciding this, the court may take into account any criteria for
fitness and propriety set out in the prudential standards .[28] However, proposed
section 21 contains a consideration seemingly not found in the
existing provisions the Court must be satisfied that
disqualification is justified .[29] In making a decision on the justification
question, the Court may have regard to the person s past conduct in
the position from which they which are being considered for
disqualification (for example, director or auditor)
Current section 22 of the Act
provides that if APRA is satisfied that a person is unlikely to be
a prudential risk to any ADI or NOHC, APRA has discretion to decide
that such person is not a disqualified person under the
Act.[30] Please
note that APRA currently also has the discretion to vary[31] and revoke[32] a disqualification
order.
Proposed section 22 of the Act
provides that the Federal Court has power to revoke or vary a
disqualification order made under proposed section
21 of the Act, as well as a general order that a person is
not a disqualified person under the Act.
The Court s proposed powers appear to be similar
to that of APRA s current powers.
Items 1-6 of Schedule
1 of the Bill are amendments that are necessary to give
effect and are relevant to those amendments proposed in
item 7 of Schedule 1 of the
Bill.
Item 9 proposes transitional
measures to the Banking Act to allow existing disqualifications by
APRA and subsequent determination to vary or revoke such
disqualifications by APRA or the AAT to continue in force after the
date of Royal Assent. The proposed transitional measures would also
allow the AAT to continue hearing cases that are still before it at
the day of Royal Assent.
Items 10-21 of Schedule
1 of the Bill propose amendments to the Insurance Act.
In particular, item 13 proposes
to substitute sections 25A and 26
of the Act, which currently give APRA the power to disqualify a
person or to determine that a person is not a disqualified person.
The proposed sections 25A and 26 will instead,
empower the Federal Court to disqualify a person, as well as revoke
or vary a disqualification respectively.
Amendments proposed under item
13 are broadly consistent with amendments proposed by
item 7 of Schedule 1 of the
Bill.
Items 10-12 of Schedule
1 of the Bill are amendments that are necessary to give
effect and are related to those amendments proposed in item
13 of Schedule 1 of the Bill.
Item 17 relates specifically to auditors and
actuaries but is couched in terms similar to those in item
13 above. Item 17 proposes to
substitute sections 44 and
45 of the Act with new sections
43A (a disqualified person must not act as an auditor or
actuary of a general insurer), 44 (Federal Court s
power to disqualify a person from being or acting as auditor or
actuary of a general insurer) and 45 (Federal
Court s power to revoke or vary a disqualification).
Current section 44 of the Act
provides that APRA has discretion to determine that a person will
be disqualified as auditor or actuary of a general insurer if that
person:[33]
- fails to adequately perform specified functions and duties
- does not meet fitness and propriety criteria of prudential
standards, or
- are ineligible for such appointment under prudential
standards.
This type of determination is reviewable under
the Act.[34]
Current section 45 of the Act
provides that APRA also has discretion to revoke such a
determination if APRA is satisfied that the person that the
opposite applies.[35]
A section 45 determination is reviewable under
the Act.[36]
Proposed section 43A of the Act
provides for offences, including strict liability offences, that a
person commits following disqualification orders made by the
Federal Court. This amendment is similar to amendments proposed in
item 3 of Schedule 1 of the Bill
(above).
Proposed section 44 of the Act
provides that the Federal Court has discretion to disqualify a
person from acting as an auditor or actuary of:
(a) a particular general insurer; or
(b) a class of general insurers; or
(c) any general insurer.
It is proposed that the Court may make such an order in terms
similar to that proposed in the current section 44. However, there
is an additional consideration of whether the Court is satisfied
that disqualification is justified, taking into account:
- the person s conduct in relation to functions and duties
required by the Act or prudential standards, and
- anything else that the Court regards as being relevant.
Proposed section 45 of the Act
provides that the Federal Court also has discretion to vary or
revoke a disqualification order made under proposed section
44 of the Act.
These proposed amendments are consistent with
those proposed in relation to the Banking Act and as proposed to
this Act in item 13 of Schedule 1
of the Bill.
Items 15, 16, 18-29 propose amendments that are
necessary to give effect and are related to the proposed amendments
in item 17 of Schedule 1 of the
Bill.
Item 21 proposes transitional amendments to the
Insurance Act in the same terms as proposed in item
9 of Schedule 1 of the Bill (above) in
relation to the Banking Act.
Items 22-34 of Schedule
1 of the Bill propose amendments to the Life Insurance
Act.
In particular, item 33 proposes
to insert new sections 245A and
245B into the Act.
Proposed section 245A provides that the Federal
Court of Australia has discretion to make an order disqualifying a
person from acting as a director, principal executive officer, as
well as an appointed actuary or auditor of:
- a particular company; or
- a class of companies registered under this Act, or
- any company registered under this Act,
registered under this Act.
It is proposed that the Court may only make such orders if the
Court is satisfied that:
- the person is not a fit and proper person to act in those
positions, or
- the order is justified.
Proposed section 245B provides
that the Federal Court of Australia has discretion to revoke or
vary a disqualification order made under proposed section 245A, as
well as a general order that the person is not a disqualified
person under the Act.[37]
These proposed amendments are broadly consistent with proposed
amendments in the Banking and Insurance Acts (see items 7,
13 and 17 of Schedule 1
of the Bill above).
Items 22-27, 31 and 32 propose
amendments that relate to the proposed amendments in item
33 of Schedule 1 of the Bill above.
However, note that item 32
proposes to repeal subsections 245(2)-(5) of the
Act and substitute those subsections with new
subsections 245(2)-(5B). The proposed subsections
include strict liability offences for individuals and companies
involved. (Please refer to the discussion on concerns about strict
liability offences expressed by the Senate Standing Committee on
Scrutiny of Bills).
Item 28 proposes to insert a new section
125A into the Act, which would allow APRA to direct a life
company to remove an auditor or actuary s appointment as the
auditor or actuary of that life company. In particular, if a life
company fails to comply with a direction by APRA to end the
appointment of a person as its auditor or actuary, that life
company commits an offence. It is important to note that such an
offence is one of strict liability. (Please refer to the discussion
on concerns about strict liability offences expressed by the Senate
Standing Committee on Scrutiny of Bills).
Item 29 proposes amendments
relating to amendments proposed in item 28
above.
Items 35-40 of Schedule 1 of
the Bill propose amendments to the RSA Act.
In particular, item 38 proposes to
substitute section 67 of the Act with new
sections 67, 67A and 67B.
Current section 67 of the Act provides that
APRA has discretion to make a disqualification order relating to an
approved auditor if that auditor has either failed to carry out or,
adequately and properly perform his or her legal duties; or is
otherwise not a fit and proper person to be an approved
auditor.[38]
Proposed section 67 provides that the Federal
Court of Australia has discretion to make disqualification orders
if the Court is satisfied that:
- the auditor has failed to carry out or, adequately and properly
perform his or her legal duties
- the auditor is not a fit and proper person to be an approved
auditor, and
- disqualification is justified,
by considering matters similar to those proposed
in relation to the Banking, Insurance and Life Insurance Acts
(please see items 7, 13, 17 and
33 of Schedule 1 of the Bill
above).
Proposed section 67A provides for the Federal
Court s power to revoke or vary a disqualification order under
proposed section 67 of the Act.
Items 35, 36, 37 and 39
propose amendments that relate to the proposed amendments in
item 38 of Schedule 1 of the Bill
above.
Proposed section 67B provides for offences,
including a strict liability offence, committed by an individual
who, knowing that he or she has been disqualified under proposed
section 67 of the Act, is or acts as an auditor of an RSA provider.
(Please refer to the discussion on concerns about strict liability
offences expressed by the Senate Standing Committee on Scrutiny of
Bills).
Item 40 proposes transitional amendments to the
Act in the same terms as items 9 and
21 of Schedule 1 of the Bill above.
Items 41-70 of Schedule 1 of
the Bill propose amendments to the SIS Act.
In particular, items 57 and 61
propose court-based disqualification where the Regulator is APRA,
while maintaining the Commissioner of Taxation s power to
disqualify.
Item 57 proposes to insert a:
- new Subdivision B into the Act Disqualification by the Federal
Court of Australia, incorporating new sections 126G, 126H and 126J,
and
- new Subdivision C into the Act Offences relating to
disqualified persons, incorporating a new section 126K.
Proposed section 126G provides that the
new Subdivision B applies to the extent that APRA
is the Regulator.
Proposed section 126H provides that the Federal
Court of Australia has the discretionary power to disqualify
individuals from being or acting as trustees, or responsible
officers of bodies corporate acting as trustees, investment
managers or custodians, of superannuation entities. In using its
discretion, the Court must consider matters which are broadly
consistent with what is proposed in items 7, 13, 17, 33 and
38 of Schedule 1 of the Bill above.
Proposed section 126J sets out the Federal
Court s power to revoke or vary a disqualification on application
by the disqualified person or APRA in terms consistent with
items 7, 17, 33 and 38 of Schedule
1 of the Bill above.
Proposed section 126K sets out offences that
individuals commit in relation to being disqualified and acting as
trustee, investment manager or custodian of a superannuation entity
(or a responsible officer of a body corporate that is trustee,
investment manager or custodian of a superannuation entity), which
includes strict liability offences. (Please refer to the discussion
on concerns about strict liability offences expressed by the Senate
Standing Committee on Scrutiny of Bills).
Item 61 proposes to insert new sections
130D and 130E into the Act.
Proposed section 130D provides that the Federal
Court of Australia, on application by APRA, would have the
discretionary power to disqualify individuals from acting as
approved auditors or actuaries of superannuation entities.
Proposed section 130E provides that the Federal
Court of Australia, on application by the disqualified person or
APRA, would have the discretionary power to vary or revoke a
disqualification order.
Items 43, 44, 49-56 and 69
propose amendments relating to amendments proposed in item
57 of Schedule 1 of the Bill above.
Items 46, 47, 55, 66 propose amendments
relating to item 61 of Schedule 1
of the Bill above.
Item 41 proposes amendments relating to
items 61 and 63 of
Schedule 1 of the Bill.
Items 62 and 63 propose
amendments allowing for the Commissioner of Taxation s powers to
disqualify a person from being an approved auditor or actuary for
the purposes of the Act.
Item 62 proposes to
substitute subsection 131(1) of
the Act, which currently deals with the Regulator s[39] power to make
disqualification orders in relation to auditors with new provisions
that set out the Commissioner of Taxation s powers to disqualify a
person from being an approved auditor or actuary for the purposes
of the Act if that person:
- does not adequately or properly perform duties of an auditor or
actuary as required under the Act, or any other Commonwealth, State
or Territory laws, including the FSCODA Act, or
- is otherwise not a fit and proper person to be an approved
auditor or actuary under this Act.
Item 63 proposes to
amend paragraphs 131(7)(a) and
(b) of the Act to include actuaries in the
provision relating to revocation of disqualification orders by the
Commissioner of Taxation.
Item 65 proposes to
substitute subsection 131A(3) in the Act. The crux
of this amendment is that regardless of whether a disqualification
order has been made by the Federal Court of Australia under
proposed section 130D or by the Commissioner of
Taxation under amended section 131 of the Act, the
Regulator may refer an auditor or actuary to his or her
professional association if the regulator is satisfied that such
person has not carried out his or her duties as required or is not
a fit and proper person to be an approved auditor or actuary.
Subsection 131A(3) currently only refers to a disqualification
order by the Regulator.
Item 67 proposes to insert a
new section 131C into the Act. The proposed
section would provide that disqualified persons must not be
auditors or actuaries of superannuation entities and sets out
offences, including a strict liability offence for non compliance
by individuals. (Please refer to the discussion on concerns about
strict liability offences expressed by the Senate Standing
Committee on Scrutiny of Bills).
Item 68 proposes to substitute
paragraph 133(1)(a) of the Act, which deals with the
suspension or removal by the Regulator, of a trustee of a
superannuation entity. It is proposed that the Regulator may also
suspend or remove a trustee of a superannuation entity if that
individual was disqualified from being or acting as trustee of that
superannuation entity under section 126H of the Act as proposed by
item 57 of Schedule 1 of the
Bill.
Item 70 proposes transitional amendments to the
Act in the same terms as items 9, 21 and
40 of Schedule 1 of the Bill above.
Part 2 of the Bill proposes amendments that are contingent on
the Financial Sector Legislation Amendment (Discretionary
Mutual Funds and Direct Offshore Foreign Investors) Act
2007 (the DMF and DOFI Act).[40]
Amendments are proposed to the:
- DMF and DOFI Act, and
- Insurance Act.
Item 71 of Schedule 1 of the
Bill proposes to repeal items 9A, 9B, 9D, 9E, 9F and
9G of Schedule 2 of the DMF and DOFI
Act.
Items 9A-9G of Schedule 2 of
the DMF and DOFI Act propose to amend sections 24-26 of the
Insurance Act by introducing the concept of corporate agent of a
direct foreign insurer.
Items 10-13 of Schedule 1 of
the Bill also propose amendments to sections 24-26 of the Insurance
Act.
Consequently, item 71 takes effect depending on
whether the DMF and DOFI Act or this Bill commences first.
If the DMF and DOFI Act commences first, item
71 takes effect once it commences.
Items 72-82 of Schedule 1 of
the Bill are consequential amendments to sections
24-25A of the Insurance Act, as proposed by items
10-13 of Schedule 1 of the Bill.
Item 83 of Schedule 1 of the
Bill proposes to amend subparagraph 27(2)(a)(i) of
the Act by adding a reference to corporate agent .
If this Bill commences first, items 10-13 of
Schedule 1 of the Bill would have taken effect and
because of those amendments, items 9A-9G of the DMF and DOFI Act
(once those provisions commence), would not be able to operate as
intended. However, items 72-83 of Schedule
1 of the Bill would ensure that the policy intention of
the DMF and DOFI Act is given effect.[41]
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APRA has wide-ranging direction powers, which are
spread out over the:
- Banking Act
- Insurance Act, and
- Life Insurance Act,
and which are, at times, fragmented and
inconsistent .[42]
This is said to make those powers complex and uncertain in scope
and application.[43]
This Part of the Bill proposes to amend those Acts, which
commence on Royal Assent and purport to streamline APRA s powers to
give directions.[44]
An amendment is also proposed to the SIS Act, which also relates
to directions given by the Commissioner of Taxation.
Items 1-6 of Schedule 2 of the
Bill propose amendments to section 11CA of the
Banking Act.
Item 1 proposes to substitute
subsection 11CA(1) of the Act.
Subsection 11CA(1) of the Act sets out the bases upon which APRA
may give a direction to an ADI or authorised NOHC. Amendments are
proposed in an effort to promote consistency across
legislation.[45]
Item 1 also introduces a requirement for APRA
to give written notice to the entity it directs specifying the
ground(s) upon which APRA made the direction.
Item 2 proposes to amend subsection
11CA(2) of the Act by inserting new paragraphs
11CA(2)(aa) and (ab). These new
paragraphs add two new types of directions that APRA may give under
subsection 11CA(2) of the Act. APRA would be able to give a
direction that the entity complies with all or part of:
- the Banking Act or the FSCODA Act, and
- a condition or direction under the Banking Act or the FSCODA
Act, which the entity had contravened.
Item 3 proposes amendments that are consistent
with those proposed by items 1-8 of
Schedule 1 of the Bill.
Item 4 proposes to insert a new
subsection 11CA(4B) into the Act.
Section 11CA of the Act only provides for APRA s power to revoke
a direction.
Proposed subsection
11CA(4B) provides that APRA, by written notice to
the body corporate, may also vary the direction it has given if it
considers that the variation is necessary and appropriate at the
time of varying the direction.
Item 5 proposes to substitute
subsection 11CA(6) of the Act, now only referring to
definitions of director , senior manager and the affairs of a body
corporate. This amendment is consistent with other amendments in
this Bill, such as those proposed by items 1-8 of
Schedule 1 and item 3 of
Schedule 2 of the Bill.
Items 7-16 of Schedule 2 of
the Bill propose amendments to the Insurance Act.
Item 7 proposes to repeal Division
2 of Part IIIA in the Act.
Division 2 relates to APRA s power to give directions to a
general insurer, authorised NOHC, or a subsidiary of either a
general insurer or authorised NOHC, to comply with prudential
standards.
Item 8 proposes to repeal sections
49M-49P of the Act.
These sections relate to accounting directions that APRA may
give general insurers and compliance with such directions.
Item 9 proposes to repeal section
51 of the Act.
Section 51 relates to APRA s power to conduct inquiries and give
directions relating to certain assets.
Item 10 proposes to amend subparagraph
60(2)(c)(ii) of the Act to refer to section 104 instead of
section 62.
Section 62 relates to directions that APRA may give a general
insurer or authorised NOHC. See item 12 of
Schedule 2 of the Bill (below)
regarding new section 104.
Item 11 proposes to repeal section
62 of the Act.
Item 12 proposes to insert new sections
104-108 into the Act.
Proposed section 104 provides that APRA may
give directions in certain circumstances. Subsection 104(1) lists
the bases upon which APRA may give these directions. This includes
if APRA has reason to believe that there is, or might be, a
material risk to the security of the assets of the general insurer
or authorised NOHC, which is not subject to a merits review.
Proposed section 105 provides that the fact
that a general insurer or authorised NOHC is subject to such
directions is not a ground for any other party to deny contractual
obligations. Third parties are relieved from obligations owed to
the general insurer or authorised NOHC if APRA s direction to that
general insurer or authorised NOHC prevents it from fulfilling its
contractual obligations. An application may be made to the Federal
Court of Australia for an order about the effect of a direction on
a contract.
Proposed section 106 provides for discretionary
and mandatory supply of information about the issue or revocation
of directions by APRA.
Proposed section 107 provides for secrecy
requirements under the Australian Prudential Regulation
Authority Act 1998 that apply unless information has been
published under proposed section 106.
Proposed section 108 provides that non
compliance with a direction by a general insurer or authorised NOHC
constitutes a strict liability offence for which the penalty is $5
500. In addition, the new provision would provide that an officer
of a general insurer or authorised NOHC commits a strict liability
offence if that officer fails in his or her duty to ensure
compliance with APRA s direction. (Please refer to the discussion
on concerns about strict liability offences expressed by the Senate
Standing Committee on Scrutiny of Bills).
Items 13 to 15 are related amendments.
Items 17-25 of Schedule 2 of
the Bill propose amendments to the Life Insurance Act.
Items 17 and 18 propose to repeal
sections 134 (Directions regarding company
assets) and 150
(Regulator may give directions during or after
investigations) of the Act respectively. These directions
powers are contained elsewhere through items 12 and
19 of Schedule 2 of the Bill.[46]
Item 19 proposes to substitute
subsection 230B(1) of the Act with new
subsections 230B(1) and 230B(1A). These
proposed amendments set out the bases upon which APRA may give a
direction to a life company and introduces a requirement for APRA
to give written notice to the entity it directs specifying the
ground(s) upon which APRA made the direction. These proposed
amendments are consistent with those proposed by items
1 and 12 of Schedule 2
of the Bill.
Item 20 proposes to substitute
paragraph 230B(2)(a) of the Act with new
paragraphs 230B(2)(a) and (aa). These paragraphs are part
of a subsection dealing with the kinds of directions that APRA may
give a life company. The Explanatory Memorandum states that this
proposed amendment is designed to address gaps in general
directions powers in the Banking and Life Insurance Acts.[47]
Item 21 proposes to substitute the
reference to director, secretary, executive officer or
employee in subparagraphs 230B(2)(d)(i), (ii) and
(iii) of the Act with a reference to director or senior
manager . Senior manager would be defined as proposed by
item 23 of Schedule 2 of the Bill
below.
Item 22 proposes to insert a new
paragraph 230B(2)(pa) into the Act. This
proposed amendment would allow APRA to give a direction to a life
company about the amount of capital that the life company
holds.
Item 23 proposes to amend subsection
230B(10) of the Act by inserting a new definition senior
manager . Senior manager would mean someone with or who exercises
any senior management responsibilities, that are within the meaning
of the prudential standards, for the life company.
Item 24 proposes to repeal paragraphs
236(1)(zj)-(zm) of the definition of reviewable decision
in the Act. These references to directions would be redundant
because the directions power would have been consolidated.[48]
Item 26 of Schedule 2 of the
Bill proposes to substitute subsection 264(1) of
the Act. Currently, that provision enables the Regulator to take
action to protect the value of beneficiaries interests.
Proposed subsection 264(1) provides that if
APRA or the Commissioner of Taxation intends to issue directions
under subsection 264(2), APRA or the Commissioner of Taxation, as
the case may be, must consider that the conduct that was, is or is
proposed to be engaged in by a trustee or investment manager of a
superannuation entity, is likely to adversely affect values of
beneficiaries interests.
In addition, proposed subsection 264(1)
provides that in other cases, APRA or the Commissioner of Taxation,
as the case may be, must consider that the conduct that was, is or
is proposed to be engaged in by a trustee or investment manager of
a superannuation entity, is likely to significantly affect values
of beneficiaries interests in an adverse manner.
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Schedule 3 of the Bill removes the requirement
for ministerial consent from certain administrative decisions made
by APRA and the Commissioner of Taxation. The Explanatory
Memorandum submits that the removal of consent is intended to be
only where the decisions do not involve wider policy
considerations.[49]
This Part contains those amendments intended to commence on
Royal Assent of the Act.
Items 1 27 of Schedule 3 of
the Bill propose to amend the Insurance Act.
Items 1-7 propose to amend provisions requiring
the Treasurer s agreement in order for APRA to perform certain
functions by deleting that requirement to the effect that APRA may
make certain administrative decisions without having to seek the
Treasurer s agreement. Those decisions involve:
- revoking a general insurer s authorisation (items 1 and
2)
- revoking a NOHC authorisation (items 3 and
4)
- modifying a prudential standard under section 32 of the Act
(item 5)
- giving a notice, to a general insurer or authorised NOHC, to
show cause why APRA should not investigate the business of that
general insurer or authorised NOHC, or have that business
investigated and reported upon by another person (items 6
and 7)
- issuing directions to Lloyd s underwriters not to issue or
renew policies, nor undertake liability under contracts of
insurance (items 9 and 10)
- issuing directions about account liabilities to certain
security trust fund trustees under section 76 (items 11 and
12)
- issuing directions to trustees not to deal with certain assets
(items 13 and 14)
- dealing with security deposits under sections 92Q, 92R and 92S
of the Act (items 15-21),
and
- the authorisation of Lloyd s underwriters (items 22
26).
Item 8 proposes to
substitute a bullet point in section
65 of the Act, whereby Lloyd s, or a company nominated by
Lloyd s, would have to lodge a security deposit of $2 million with
APRA rather than the Treasurer.
Items 28 31 of Schedule 3 of
the Bill propose amendments to the Life Insurance Act.
Item 28 proposes to amend subsection
21(1) of the Act, which deals with decision-making on a
company s application for registration with APRA as a life
insurance provider under the Act. Currently, the Treasurer must
approve any decision to refuse an application for registration
under that section. This provision removes the Treasurer s role
from this, leaving the decision-making responsibility solely on
APRA.
Items 29-31 remove the need for ministerial
consent for APRA to:
- approve a mortgage or charge of assets of a statutory fund
(item 29)
- issue a notice where a life company has contravened Part 4 of
the Act in relation to statutory funds (item 30),
and
- refuse to approve a distribution of retained profits or
shareholder capital in a statutory fund (item
31).
Items 32 38 of Schedule 3 of
the Bill amend the SIS Act by removing the need for ministerial
consent for:
- APRA to cancel an RSE licence (items
32-34)
- the Regulator[50] to decide to suspend, remove, or extend the suspension
of a trustee of a superannuation entity (item
35)
- APRA to approve the transfer of member and beneficiary benefits
in accordance with a section 145 application (item
36-37), and
- the Regulator to make certain directions to trustees,
investment managers or other people possessing or controlling
assets, under subsections 264 (3), (3A) and (4) (item
38).
This Part contains amendments which are contingent on the
commencement of the DMF and DOFI Act.
In general, Part 2 of Schedule
3 of the Bill proposes amendments to sections 63 and 64 of
the Insurance Act, which outline processes for review of certain
decisions under that Act (including the accompanying statements of
notification of decisions). Currently the provisions refer to
reviewable decisions of both the Treasurer and APRA. The amendments
remove all references to the Treasurer from the provisions, thus
establishing APRA as the sole decision-maker and reviewer for the
purposes of the sections.
Division 1 of Part 2, Schedule
3 contains items 39-43, which will occur
if the DMF and DOFI Act commences before this Bill. In this
scenario, only certain amendments are needed as other relevant
provisions will have been amended by the DMF and DOFI Act.
Item 39 proposes to substitute
the wording in subsection 3(1)(note to the definition of
insurance business) of the Insurance Act to Some
contracts of insurance .
Item 40 proposes to substitute section
3A of the Insurance Act with a new provision. New
section 3A would generally provide for the Insurance
Regulations to specify that certain contracts are not insurance
contracts for the purposes of the Insurance Act.
Items 41 and 43 propose to
substitute the following definitions in
subsection 63(1) of the Insurance Act:
- decision maker, and
- reviewable decision.
Item 42 proposes to repeal paragraph
(a) of the definition of person affected by a reviewable
decision in subsection 63(1) of the
Insurance Act.
It is noted that subsection 63(1) does not yet contain these
definitions, as they are due to be inserted on 1 July 2008 by the
DMF and DOFI Act.[51]
The purpose of those amendments to definitions in subsection
63(1) of the Insurance Act is to remove all references (old and
new) to the Treasurer, and consequently, ministerial consent, from
prudential legislation.[52]
Division 2 of Part 2, Schedule
3 contains items 44 64, which are
necessary in case the DMF and DOFI Act has not commenced before the
commencement of this Bill. If that happens, a wider range of
amendments are needed to remove references to the Treasurer in the
review processes under the Act.
Division 3 of Part 2, Schedule
3 contains amendments that must occur once the Schedule 2
of the DMF and DOFI Act has commenced on 1 July 2008.
For example:
Item 65 proposes to substitute item 8
of Schedule 2 of the DMF and DOFI Act with a new
section 3A.
Item 66 proposes to remove misdescribed
amendments in items 13-33 of Schedule 2
of the DMF and DOFI Act. This is to eliminate any errors that might
occur as a result of the Bills amendments, if this Bill happens to
commence prior to the DMF and DOFI Act.[53]
Item 67 proposes to substitute
subsection 3(1)(note to the definition of insurance
business) in the Insurance Act to simply read Some
contracts of insurance . (See item 39 of
Division 1 of Part 2 in
Schedule 3).
Schedule 4 of the Bill sets out proposed
amendments relating to Review of decisions in the:
- Banking Act
- Insurance Act
- Life Insurance Act
- SIS Act, and
- FSCODA Act.
These amendments are aimed at expanding the scope
of merits review for certain decisions made by APRA and the
Commissioner of Taxation.[54]
In general, merits review is a process where
either a person or entity, who is not the primary decision maker,
reconsiders the original decision in terms of facts, law and policy
in order to determine the correct or best decision that could be
made given the relevant facts.[55]
The aims of merit review are to:[56]
- ensure fair treatment for everyone who is affected by a
decision
- improve the quality and consistency of decisions, and
- improve transparency and accountability of government
decisions.
It is important to note that merits review
differs from judicial review[57] and should not be confused.[58]
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Items 1-14 of Schedule 4 of
the Bill propose amendments to the Banking Act.
Item 1 proposes to insert a new
subsection 9(9) into the Act.
Section 9 of the Act relates to APRA s authorisation for a body
corporate to carry on a banking business. APRA may impose, vary or
revoke conditions on any such authority that it grants but must
provide written notice thereof.
Proposed subsection 9(9) provides that merits
review would apply to APRA s decisions to:
- refuse to grant a body corporate authority to carry on banking
business
- impose conditions or additional conditions on such an
authority, and
- vary such conditions.
Item 2 proposes to insert a new
subsection 9A(8) into the Act.
Section 9A of the Act provides for revocation of APRA s
authority to a body corporate to carry on banking business.
Proposed subsection 9A(8) provides that merits
review would apply to APRA s decisions relating to revoking and
refusing to revoke such authority.
Item 3 proposes to insert a new
subsection 11(5) into the Act.
Section 11 of the Act provides that APRA may determine that
provisions of the Banking Act do not apply to a person for a
specified period of time.
Proposed subsection 11(5) provides that merits
review would apply to APRA s decisions to:
- refuse to make such a determination, and
- vary or revoke such determination.
Item 4 proposes to insert new
subsection 11AA(8) into the Act.
Section 11AA of the Act relates to APRA s authorisation for a
body corporate to be an NOHC of an ADI. The authority applies to
any ADIs which are subsidiaries of that body corporate. APRA may
impose, vary or revoke conditions on any such authority (on
prudential matters) that it grants but must provide written notice
thereof and get that authority published in the
Gazette.
Proposed subsection 11AA(8) provides that
merits review would apply to APRA s decisions to:
- refuse to grant a body corporate authority to be an NOHC of an
ADI
- impose conditions or additional conditions on such an
authority, and
- vary those conditions.
Item 5 proposes to insert new
subsection 11AB(8) into the Act.
Section 11AB of the Act relates to revocation of APRA s
authority to a body corporate to be an NOHC of an ADI.
Proposed subsection 11AB(8) provides that
merits review would apply to APRA s decisions relating to revoking
and refusing to revoke such authority.
Item 6 proposes to insert new
subsection 11AF(7C) into the Act.
Section 11AF of the Act relates to APRA s power to make
prudential standards for ADIs and authorised NOHCs, as well as, in
writing, vary or revoke a prudential standard.
Proposed subsection 11AF(7C) provides that
merits review would apply to APRA s decisions to:
- determine a standard for one or more specified ADI or NOHC,
and
- vary such standard.
Item 7 proposes to insert new
subsection 11CA(5A) into the Act.
Section 11CA of the Act relates to APRA s power to give
directions.
Proposed subsection 11CA(5A) provides that
merits review would apply to APRA s decision to give a direction on
the basis that the body corporate:
- has contravened a prudential standard or requirement
- is an ADI and the direction is necessary to protect the
interests of depositors of the ADI
- is an authorised NOHC and direction is necessary to protect the
interests of depositors of any ADI that is a subsidiary of the body
corporate
- is conducting its affairs in an improper or financially unsound
way, or
- has contravened a requirement under the FSCODA Act.
Items 8-9 propose to
restructure and amend section
11CB of the Act by creating subsections
11CB(1) and (2).
Section 11CB of the Act relates to APRA s discretionary power to
certify an industry support contract. APRA may certify an industry
support contract on request by all parties to the contract and if
APRA considers that is appropriate to do so. APRA must provide
written notification of such certification to all the parties of
the contract.
Proposed subsection 11CB(2) provides that
merits review would apply to APRA s refusal to certify an industry
support contract.
Items 10-11 propose to amend section
11CC of the Act by inserting new subsections
11CC(3A) and (7) into the Act.
Section 11CC of the Act relates to APRA s power to direct
parties to an industry support contract to comply with the contract
and to revoke such a direction.
Proposed subsection 11CC(3A) enables APRA to
vary such a direction if APRA considers that it is necessary and
appropriate to do so, at the time of the variation.
Proposed subsection 11CC(7) provides that
merits review would apply to APRA s decisions under section 11CC
to:
- give such direction
- vary such direction, and
- revoke a certification of an industry support contract.
Item 12 proposes to repeal subsection
51C(4) of the Act, removing automatic confidentiality to
improve transparency of decision reviews.[59]
Subsection 51C(4) provides for proceedings in relation to APRA s
reviewable decisions.
Item 13 proposes to insert a new
subsection 66(2C) into the Act.
Section 66 of the Act provides for APRA s power to give consent
to the use of certain restricted words and expressions in relation
to a financial business.
Proposed subsection 66(2C) provides that merits
review would apply to APRA s decisions to:
- refuse consent
- impose conditions, or additional conditions, on consent
- vary such conditions, and
- revoke consent.
Item 14 proposes to insert a new
subsection 67(5) into the Act.
Section 67 of the Act relates to APRA s power to give consent to
establishing or maintaining representative offices of overseas
banks.
Proposed subsection 67(5) provides that merits
review would apply to APRA s decisions to:
- refuse consent
- impose conditions, or additional conditions, on consent
- vary such conditions, and
- revoke consent.
Items 15-17 of Schedule 4 of
the Bill proposes amendments to the FSCODA Act.
Item 15 proposes to insert a new Part
3A Review of decisions into the Act.
Proposed Part 3A contains provisions on
requirements relating to:
- APRA s written notice of a reviewable decision that it makes
and statement regarding the availability of review of that
decision
- requests for a review of decisions by APRA by written notice to
APRA within a particular period of time and setting out reasons for
making the request
- what APRA must do once APRA receives the request for review
reconsider its decision and either confirm, revoke or vary that
decision, and
- applications made to the AAT to review decisions that APRA has
confirmed or varied.
Item 16 proposes to insert a new
definition of decision into section 31 of
the Act, which is consistent with the definition of decision in the
Administrative Appeals Tribunal Act 1975.
Item 17 proposes to insert a new
definition of reviewable decision into section
31 of the Act, which includes APRA s decisions:
- not to exempt an organisation under paragraph 7(2)(j)
- not to allow a longer period of time in which a corporation can
fulfil its obligations to provide APRA with information under
subsection 9(3)
- to include a registered entity in a particular category under
section 11, which lists the names and categories of registered
entities, and
- to determine a reporting standard (or vary such standard) for a
particular financial sector entity under section 1.
Items 18-27 of Schedule 4 of
the Bill propose amendments to the Insurance Act.
Item 18 proposes to insert a new
subsection 7(6) into the Act.
Section 7 of the Act provides that APRA may determine that all
or part of the Act does not apply for a specified period of
time.
Proposed subsection 7(6) provides that merits
review would apply to APRA s decision to:
- refuse to make a determination that one or more provisions of
the Act do not apply to a person
- impose conditions on or specify a period in such a
determination, and
- vary or revoke such a determination.
Item 19 proposes to insert a new
subsection 13(6) into the Act.
Section 12 of the Act provides for requirements relating to APRA
s power to grant authorisations to body corporates to carry on
insurance business.
Section 13 of the Act provides that APRA may impose conditions
on such authorisations, as well as revoke or vary those
conditions.
Proposed subsection 13(6) provides that merits
review would apply to APRA s decisions to:
- impose conditions or additional conditions on such
authorisations, and
- vary those conditions.
Item 20 proposes to insert a new
subsection 15(7) into the Act.
Section 15 of the Act relates to when APRA may revoke an
authorisation to carry on insurance business.
Proposed subsection 15(7) provides that merits
review would apply to APRA s decisions to revoke such
authorisations.
Item 21 proposes to insert a new
subsection 17(10) into the Act.
Section 17 of the Act relates to APRA s discretionary power to
direct general insurers to arrange for APRA approved assignment of
liabilities to enable revocation of that insurer s authorisation to
carry on an insurance business.
Proposed subsection 17(10) provides that merits
review would apply to APRA s decisions to:
- give such directions
- refuse to approve a proposed assignment of liabilities,
and
- impose conditions on an approval.
Item 22 proposes to insert a
new subsection 19(5) into the Act.
Section 19 of the Act relates to conditions that APRA may impose
on an NOHC authorisation.
Proposed subsection 19(5) provides that merits
review would apply to APRA s decisions to:
- impose conditions or additional conditions on an NOHC
authorisation, and
- vary those conditions on such authorisation.
Item 23 proposes to insert a new
subsection 21(7) into the Act.
Section 21 of the Act provides for when APRA may
revoke an NOHC authorisation.
Proposed subsection 21(7) provides that merits
review would apply to APRA s decision to revoke such
authorisations.
Item 24 proposes to insert a new
subsection 32(7) into the Act.
Section 32 of the Act provides that APRA may determine
prudential standards. In particular, paragraph 31(1)(e) provides
that such standards include those that must be complied by
specified general insurers, authorised NOHCs or subsidiaries
thereof.
Proposed subsection 32(7) provides that merits
review would apply to APRA s decision to determine, vary or revoke
paragraph 31(1)(e) standards.
Item 25 proposes to insert a
new subsection 49H(5) into the Act.
Section 49H of the Act relates to requests by a general insurer
that an APRA delegate s decision relating to extension of time for
providing an actuary s report be reconsidered. On receiving a
request, APRA may confirm, revoke or vary its decision.
Proposed subsection 49H(5) provides that merits
review would apply to APRA s decision to confirm or vary its
delegate s decision.
Item 26 proposes to repeal subsection
63(14) of the Act.
Subsection 63(14) relates to requirements of hearings of
proceedings about reviewable decisions of the Treasurer or APRA, as
well as directions that the AAT may order.
Repealing subsection 63(14) removes automatic confidentiality to
improve transparency of such decisions.[60]
Item 27 proposes to insert a new
subsection 116A(7) into the Act.
Section 116A of the Act relates to assets and liabilities of
general insurers in Australia.
Subsection 116A(5) of the Act relates to APRA s power to make
directions about the extent to which premiums retained under a
reinsurance contract by a person outside Australia are considered
to be assets in Australia for the purposes of section 28 of the Act
that requires a general insurer to hold sufficient assets in
Australia.
Subsection 116A(6) of the Act relates to when APRA must revoke
or vary such directions.
Proposed subsection 116A(7) provides that
merits review applies to APRA s decisions to:
- determine amounts under subsection 116A(5), and
- vary such determinations under subsection 116A(6).
Items 28-35 propose amendments to the Life
Insurance Act all of which relate to matters which come within the
definition of reviewable decision in existing subsection
236(1) of the Act. The effect of the amendments is to
extend the range of decisions which are reviewable.
Items 36 and 37 proposes to
repeal subsections 236(1A) and
237(5) of the Act respectively.
Subsection 236(1A) sets out what are not
reviewable decisions for the purposes of the Act. According to the
Explanatory Memorandum, this list has been removed to avoid the
confusion of having the same decisions in both subsections 236(1)
and (1A) of the Act dealing with reviewable and non reviewable
decisions respectively.[61]
Subsection 237(5) provides for the procedure of
proceedings relating to reviewable decisions. This amendment is
similar to amendments that are proposed by items 12,
26 and 42 of Schedule 4
of this Bill. By removing automatic private hearings, these
proposed amendments aim to improve transparency of decision-making.
However, private hearings may still be available on application by
the affected person.[62]
Items 38-41 of Schedule 4 of
the Bill proposes to amend the definition of reviewable decision to
include the following:
- APRA s decision to direct an RSE licensee[63] to modify its risk management
strategy under subsection 29HB(3) of the Act: item
38.
- APRA s decision to direct an RSE licensee of an registrable
superannuation entity registered under Part 2B of the Act to modify
the entity s risk management plan under subsection 29PB(3) of the
Act: item 39
- the Regulator s refusal to approve provision of benefits under
subparagraph 62(1)(b)(v) of the Act: item 40.
- the Regulator s decision to suspend or remove a trustee of a
superannuation entity under section 133 of the Act: item
41.
Item 42 proposes to repeal subsection
344(11) of the Act.
Subsection 344(11) provides for the procedure
of proceedings relating to reviewable decisions. Please refer to
item 37 of Schedule 4 above.
The advantage of the Bill lies in its attempt to create
consistency across prudential and related legislation. This is in
line with the Government s announcement that it would seek to
streamline prudential regulation for ADIs, general and life
insurers, as well as superannuation entities.
However, some stakeholders have raised concerns about the impact
of the Bill.
Notably some of the submissions to Treasury s 2007 consultation
paper reflect concerns regarding the need to recognise that
ministerial consent and availability of merits review are different
and should not confused. Some stakeholders are concerned that
removing ministerial consent removes the final check on decisions
and would decrease consumer confidence in the prudential framework.
In addition, as pointed out by some stakeholders, merits review
occurs after an administrative decision is made, which could
potentially result in an organisation suffering irreversible damage
to its reputation.
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[50]. Regulator means APRA, ASIC or the
Commissioner for Taxation, depending on the provision: see
Superannuation Industry (Supervision) Act 1993 section
10.
Sharon Scully
13 March 2008
Bills Digest Service
Parliamentary Library
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