Bills Digest no. 119 2008–09
Financial Sector Legislation Amendment (Enhancing
Supervision and Enforcement) Bill 2009
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
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 19 March
2009
House: House of Representatives
Portfolio: Treasury
Commencement:
The formal parts commence
on Royal Assent; Schedule 1 commences on a single day to be fixed
by Proclamation or 6 months after Royal Assent, whichever occurs
first; and Schedule 2 commences on the day after Royal
Assent.
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 Bill has two main
purposes:
- to make the Australian Prudential Regulation Authority (APRA)
responsible for the regulation of non-operating holding companies
(NOHCs) of life insurers,[1] and
- to harmonise APRA s powers to seek court injunctions under the
Banking Act 1959 (the Banking Act), the Insurance Act
1973 (the Insurance Act), the Life Insurance Act 1995
(the Life Insurance Act) and the Superannuation Industry
(Supervision) Act 1993 (the SIS Act).
According to its website:
The Australian Prudential Regulation Authority
(APRA) is the prudential regulator of the Australian financial
services industry. It oversees banks, credit unions, building
societies, general insurance and reinsurance companies, life
insurance, friendly societies, and most members of the
superannuation industry. APRA is funded largely by the industries
that it supervises. It was established on 1 July 1998. APRA
currently supervises institutions holding approximately $3.4
trillion in assets for 21 million Australian depositors,
policyholders and superannuation fund members.[2]
In fulfilling its role as prudential regulator, APRA is
empowered under the Banking Act, the Insurance Act, the Life
Insurance Act and the SIS Act to seek a court injunction against a
person (usually an officer of a bank or insurance company etc that
is subject to APRA s regulatory oversight) who contravenes the
prudential regime contained in one of these Acts, including
breaching a condition attached to the authorisation or regulation
of an APRA-regulated entity. Presently APRA s powers vary between
the four Acts, and the amendments contained in Schedule 2 to the
Bill seek to harmonise the circumstances in which the Federal Court
may grant an injunction.
In order to explain the significance of the measures contained
in Schedule 1 to the Bill that bring NOHCs of life insurers under
APRA s regulatory umbrella, it may assist to explain how authorised
deposit-taking institutions (ADIs), general insurance companies and
their NOHCs fall under APRA s regulation and supervision. It may
also assist to explain how life insurers themselves (as opposed to
their NOHCs) are regulated.
APRA is primarily responsible for supervising banks, credit
unions and building societies in fact any corporation that has been
authorised to carry on banking business under the Banking Act. A
body corporate that wishes to carry on banking business in
Australia may apply to APRA, which may grant authority to a body
corporate to carry on banking business in Australia.[3] Where an authority is in
force, the body corporate holding such an authority is known as an
authorised deposit-taking institution (or ADI for short).[4]
In general, a licence (or authority) is not needed to purchase
or establish a bank, but the bank needs an authority from APRA to
run its banking business. If the owner of the bank is a NOHC, it
may need an authority from APRA.[5] APRA may refuse to grant an authority to the
subsidiary bank to carry on banking business unless the NOHC holds
an authority.[6]
Division 4 of Part III of the Insurance Act (which includes
section 18 quoted below) deals with the authorisation of NOHCs of
general insurers. Division 5 of Part III deals with issues
connected with directors, senior managers and other representatives
of general insurers and authorised NOHCs, such as the fact that
disqualified persons may not act as directors or managers of
general insurers or authorised NOHCs (section 24). Division 6 deals
with other related matters, including where a general insurer or
NOHC changes its name or ceases to exist.
Perhaps more importantly, Part IIIA deals with prudential
supervision and monitoring of general insurers, authorised NOHCs
and their subsidiaries.
The term authorised NOHC is defined to mean a body
corporate:
- authorised under section 18; and
- that is a NOHC of a general insurer or general
insurers.[7]
The term general insurer is defined as a body corporate
that is authorised under section 12 to carry on insurance business
in Australia and includes a foreign general insurer.[8] Section 12 sets out how a
body corporate applies to APRA for authority to carry on insurance
business in Australia and also empowers APRA to authorise the
applicant to carry on insurance business in Australia. The
authorisation must be in writing and may be subject to
conditions.[9]
Section 18 of the Insurance Act provides that a NOHC of a
general insurer may apply to APRA for an authorisation. The NOHC
may need an authority because APRA may refuse to grant a subsidiary
an authority under section 12 without the holding company first
being authorised by APRA.
As mentioned above, APRA is already responsible for supervising
life companies (including friendly societies) registered under the
Life Insurance Act, but the Bill provides APRA with responsibility
for regulating the NOHCs of life companies that are currently
outside its bailiwick.[10] As the Assistant Treasurer stated in his second reading
speech:
This measure is consistent with the Insurance
Core Principle ICP17 of the International Association of Insurance
Supervisors on Group-wide supervision, which is that [t]he
supervisory authority supervises its insurers on a solo and a
group-wide basis .[11]
Mr Bowen went on to say:
International experience has demonstrated the
interconnection between companies in a corporate conglomerate,
including between prudentially regulated entities and unregulated
entities. This measure will strengthen the prudential regulation of
life insurance conglomerates in line with the regulation of other
financial conglomerates.[12]
In 2003, the International Association of Insurance Supervisors
(IAIS) explained the need to supervise all companies within a
conglomerate, saying:
17.1. Supervision of insurers, who are part of
a wider insurance group or conglomerate, whether domestic or
international, should not be limited to the solo supervision of
that insurer. The operations of other group companies, including
any holding companies if applicable, are taken into account in
assessing the totality of the risk exposures of the insurers,
insurance groups and conglomerates. The fact that such an insurer
is part of a group generally alters, often considerably, its risk
profile, its financial position, the role of its management, and
its business strategy. As a consequence, there should be legal
provisions and effective supervision that adequately meet the
changed profile of the insurer, ensuring adequate group wide
assessment and supervisory action as appropriate.[13]
As at December 2008, there were 32 life companies registered
with APRA.[14]
While there is no reliable data available about the number of life
insurer NOHCs that currently exist or are likely to be authorised
under the changes proposed in the Bill, there are unlikely to be
many NOHCs, given the small number of life companies under APRA s
oversight. By way of comparison, there are only 15 NOHCs of general
insurers authorised under section 18 of the Insurance Act, compared
with the fact there are 132 general insurance entities regulated by
APRA (as at June 2008).[15] If such statistics for general insurers are replicated
in the life insurance industry, the changes proposed by the Bill
are unlikely to create any significant increase in APRA s workload
although they will mean that the NOHCs of life insurers will have
to comply with the administrative and regulatory requirements
imposed on them by APRA, and will thus be subject to supervision by
APRA.
Neither the term Non-Operating Holding Company nor the
abbreviation NOHC is currently used in the Life Insurance Act (see
discussion of the main provisions of the Bill below).
In June 2008, the Rudd Government announced its intention to
bring NOHCs of life insurers under APRA s regulatory
umbrella.[16] In
discussing a number of reforms designed to permit regulators to
manage financial stability effectively in the current economic
times, the Treasurer said:
The reforms will also provide for the judicial
management of general insurers and bring non-operating holding
companies in the life insurance sector into the regulatory net and
remove potential legal barriers to the recapitalisation of a
failing institution. These are sensible enhancements to our
existing regulatory arrangements, and the government will bring
forward legislation to enact these proposals as part of the package
of measures that I am announcing today. It is important that the
government ensures that APRA and the RBA [Reserve Bank of
Australia] have the tools they need to act swiftly and effectively
to resolve and, if possible, to avoid any crisis in a regulated
institution.
This is particularly important with our key
financial institutions, where instability in one can quickly spread
through the system and create instability in other, otherwise
sound, entities.[17]
The actual contents of the Bill were announced on 2 March 2009
in a joint press release by the Hon Chris Bowen MP, Assistant
Treasurer, and Senator Nick Sherry, Minister for Superannuation and
Corporate Law.[18]
They said:
In this difficult environment, we are ensuring
that APRA has access to full information about the financial
entities it regulates and can respond quickly and decisively to
prudential concerns
APRA currently regulates the NOHCs of general
insurers and authorised deposit-taking institutions (ADIs). Under
this Bill, it will have the power to register and supervise the
NOHCs of life insurance companies and enforce their compliance with
prudential requirements.
With the passage of the Bill, APRA will be able
to seek a consistent and comprehensive range of injunctions from
the Federal Court of Australia on prudential matters, and this
power will apply to ADIs, general insurance, life insurance and
superannuation.
The move to bring life insurance NOHCs within APRA s regulatory
umbrella makes sense, given that APRA is already responsible for
the regulation of other NOHCs. Many insurance businesses are
conducted through a combination of holding and subsidiary
companies, some of which APRA is currently responsible for, and
some of which it is not (but arguably should be).
The inclusion of life insurance NOHCs under APRA s regulatory
umbrella also reflects the spirit of several recommendations made
by the HIH Royal Commissioner in 2003 albeit in the context of
general insurance companies particularly the idea that APRA should
be in a position to know the true financial health of associated
companies:
39 I recommend that the Australian Prudential
Regulation Authority monitor the financial condition of corporate
groups, including those with foreign operations. Pending the
development of the proposed prudential standard on supervision of
corporate groups, APRA should use existing powers to require groups
to provide any information it considers necessary to perform this
role.
40 I recommend that the Australian Prudential
Regulation Authority take steps to ensure that it effectively
exchanges with relevant foreign regulators information and
intelligence on the operations of Australian insurers with
international operations.
41 I recommend that the Australian Prudential
Regulation Authority modify the prudential standards to require the
annual production by an authorised general insurer s approved
actuary of a report on the overall financial condition of the
insurer.
42 I recommend that the Commonwealth Government
amend the Insurance Act 1973 to extend prudential regulation to all
discretionary insurance-like products to the extent that it is
possible to do so within constitutional limits.[19]
Similarly, the Financial System Inquiry, chaired by Stan Wallis,
recommended in its final report in 1997:
Recommendation 51: The APRC should be empowered
to access operations of other non-regulated entities in the group.
The APRC should have clear powers to verify intra-group exposures
and otherwise be satisfied as to the adequacy of separation of the
regulated financial entity from other financial operations within
the group, including any holding companies and affiliates such as
merchant banks and finance companies.[20]
The Bill has been referred to the Senate Economics Committee for
inquiry and report by 7 May 2009.[21] The reason for the referral was stated as
follows:
Examine the provisions of the bill that relate
to the regulation on non-operating holding companies of life
insurance companies and the provisions of the bill that relate to
the harmonisation of powers for APRA to seek court
injunctions.[22]
The closing date for submissions was 13 April 2009, and none has
yet been made available to the public.
To date, there has been no public comment on the Bill by
significant interest groups such as the Investment and Financial
Services Association (IFSA), which represents life insurers and
fund managers in Australia, nor bodies such as the Insurance
Council of Australia, which represents the interests of the
Australian general insurance industry.[23]
Similarly, there has been no public comment on the Bill by the
minor parties or independents. In his response to the Treasurer s
statement on financial stability on 2 June 2008 (see above), when
among other things the Treasurer foreshadowed the Government s
intention to bring life insurer NOHCs into the regulatory net, the
Leader of the Opposition, the Hon Malcolm Turnbull MP said: The
Treasurer has outlined a number of measures in his statement which
we welcome in principle. We will need to see the detail of them
all, and I am sure he will make those available in due course .
[24] However, it is
not entirely clear if Mr Turnbull was referring to the measures
aimed at NOHCs of life insurers or if he was referring to the other
measures mentioned by the Treasurer, such as the bank deposit
guarantee.
The financial impact of including life insurance NOHCs under the
APRA regulatory umbrella is expected to be low .[25] As stated in the Explanatory
Memorandum for the Bill:
APRA s supervision of life insurance NOHCs is
expected to be funded by industry on a user-pays basis. APRA is
also expected to incur time and resource costs in developing new
standards for life insurance NOHCs, however, these costs are not
expected to be significant.[26]
The Explanatory Memorandum also mentions the cost of life
insurance NOHCs complying with APRA s prudential regime, saying
that they may be liable to pay a financial institutions levy. Such
compliance costs are not quantified.[27]
The Explanatory Memorandum deals separately with the financial
impact of Schedule 2 of the Bill, which harmonises APRA s powers to
seek court injunctions under the various prudential legislation
mentioned at the start of this digest. Both the financial impact
and the compliance cost impact of the measures are estimated to be
nil , because APRA s supervision of prudentially regulated entities
[is] expected to be funded by industry on a user-pays basis
.[28]
Registration of NOHCs of life insurers
Item 21 inserts proposed Division 2 into Part 3
of the Life Insurance Act. It deals with the registration of NOHCs
of life companies and comprises proposed sections 28A, 28B,
28C and 28D.
It is unnecessary to go into much detail about the amendments
contained in proposed Division 2 of Part 3 of the
Life Insurance Act because is in very similar terms to Division 4
of Part III of the Insurance Act. The provisions which currently
make up that Division have been largely unaltered since their
insertion into the Insurance Act by the General Insurance
Reform Act 2001 and are not the current subject of legislative
reform.
The main difference between the two Divisions is that
proposed Division 2 of Part 3 of the Life
Insurance Act deals with the registration of NOHCs of life
insurers, whereas Division 4 of Part III of the Insurance Act deals
with the authorisation of NOHCs of general insurers. In
part this distinction can be explained by the fact that Part 3 of
the Life Insurance Act deals with the registration of life
companies (and their NOHCs), whereas Part III of the Insurance Act
deals with the authorisation of general insurers (and
their NOHCs) to carry on insurance business although the genesis of
the distinction remains unclear.[29]
Proposed section 28A deals with the
registration of NOHCs of life companies, and proposed
section 28B provides that APRA may impose conditions on
the registration. Proposed section 28C sets out
the circumstances when APRA may revoke the registration of a NOHC,
including where it would be contrary to the public interest for the
registration to remain in force (proposed paragraph
28C(1)(b)) or where it would be contrary to the interests
of the policy owners of any life company that is a subsidiary of
the registered NOHC for the registration to remain in force
(proposed paragraph 28C(1)(d)). APRA must give the
company written notice of its intention to revoke the registration,
and the company must be given at least 90 days to make written
submissions in response unless APRA forms the view that complying
with this requirement would result in a delay that would be
contrary to the interests of either the public or policy owners of
any subsidiary life company (proposed subsections 28C(2)
and (3)).
There is no equivalent provision in the Life Insurance Act
dealing generally with the revocation of the registration of life
companies although similar provisions to those contained in the
Bill are found in section 21 of the Insurance Act and apply to the
NOHCs of general insurance companies.[30]
Under existing section 26 of the Life Insurance Act, APRA may
cancel the registration of a defunct life company, and under
existing section 27, a life company may voluntarily deregister
itself. Further, under existing subsection 230B(1), APRA may give a
life company a direction in a variety of circumstances, including
where:
- the company is conducting its affairs in an improper or
financially unsound way; or
- the failure to issue a direction would materially prejudice the
interests of policy owners or prospective policy owners of the
company; or
- the company is conducting its affairs in a way that may cause
or promote instability in the Australian financial system.[31]
If the company fails to comply with the direction, it may be
guilty of an offence under section 230F, and the Federal Court may
also make an injunction under section 235. The decision to give a
direction under section 230B may also be reviewable under section
236 of the Life Insurance Act. In such a case, the decision may be
reviewed by the body which made the original decision (eg APRA),
and can be the subject of a further review to the Administrative
Appeals Tribunal (the AAT): section 236.[32]
Under item 157 of the Bill, section 236
will be amended to include the following decisions as reviewable
decisions:
(gb) a refusal of an application for
registration of a body corporate under section 28A;
(gc) a decision to impose conditions, or
additional conditions, on a NOHC registration;
(gd) a decision to vary conditions imposed on a
NOHC registration;
(ge) a decision to revoke under section 28C a
NOHC registration
In any event, a person who is aggrieved by a decision made under
an enactment (including any of the prudential legislation), may
apply for a review of the decision under the Administrative
Decisions (Judicial Review) Act 1977. The grounds for such a
review are set out in section 5 of that Act.[33] Judicial review involves the review
of questions of law, whereas a review by the AAT (see above)
involves a consideration of the merits of administrative action,
particularly findings of fact and the policy behind the decision,
rather than the lawfulness of the original decision.[34]
Prudential requirements and standards
The provisions contained in Schedule 1 to the
Bill that set out the prudential requirements that will
apply to NOHCs of life insurers are consistent with the prudential
requirements that already apply to life companies. Both types of
body corporate will be required to register under the Life
Insurance Act and to comply with any conditions that APRA may
attach to the registration.[35] Both types of body corporate must also comply
with the prudential standards set by APRA and be subject generally
to APRA s supervision regime, including reporting
obligations.[36]
Under item 15 of Schedule 1, one of the
conditions that APRA may impose on the registration of a body
corporate as a life company may be the registration of its holding
company (if any): proposed subsection 22(1A).
Many of the amendments contained in Schedule 1
are simply consequential upon the commencement of the substantive
measures contained in the Schedule. For example, a number of items
in Schedule 1 replace the words this Act with a specific reference
to section 21 of the Life Insurance Act (being the provision
requiring the registration of life companies, as distinct from
proposed section 28A requiring the registration of
their NOHCs).[37]
Other provisions in Schedule 1 amend existing provisions in the
Life Insurance Act to include references to NOHCs of life insurers
alongside existing references to life companies.[38]
Items 129 134 amend existing section 230A,
which provides that APRA may make prudential standards for life
companies. The amendments contained in these provisions of the Bill
make it clear that if APRA determines or varies a standard, it must
give a copy of the standard or variation (or revocation) to any
registered life company or registered NOHC of a life insurer to
which the standard applies. Similarly, item 136
amends subsection 230B(1) to make it clear that APRA may give a
direction to any life company or registered NOHC if APRA has reason
to believe the body corporate has contravened, or is likely to
contravene, a provision of the Life Insurance Act or the
Financial Sector (Collection of Data) Act 2001.
Item 138 amends subsection 230B(2) to set out the
kinds of direction that APRA may give a body corporate, including a
direction to comply with relevant legislation; to remove a director
or senior manager from office; to order an audit of the body
corporate s affairs; or not to pay a dividend. None of the detail
contained in items 136 and 138 is significantly
different to the current provisions as they apply to life
companies, but the amendments include reference to NOHCs and tidy
up the drafting of the existing provisions.
Items 182 and 184 amend the Dictionary
contained in the current Schedule to the Life Insurance Act to
insert a definition for the term Non-Operating Holding
Company and the abbreviation NOHC , neither of which is
currently used in the Life Insurance Act. The definition of the
term Non-Operating Holding Company is identical to that
contained in the Banking Act and the Insurance Act, being a body
corporate:
- of which the first body corporate is a subsidiary; and
- that does not carry on a business (other than a business
consisting of the ownership or control of other bodies corporate);
and
- that is incorporated in Australia.[39]
Part 2 of Schedule 1 (being items 188 223)
makes minor amendments to a variety of Acts, primarily to:
- include reference to NOHCs registered under the Life Insurance
Act (as a result of the amendments contained in Part 1 of Schedule
1 to the Bill)[40],
or
- confine the operation of various provisions of the listed Acts
to life companies, as distinct from their NOHCs.
For example, following the amendment proposed in item
195, only a company registered as a life company under
section 21 of the Life Insurance Act (and not a body corporate
registered as a NOHC of a life insurer under proposed
section 28A) will be eligible under section 283AC of the
Corporations Act 2001 (the Corporations Act) to be a
trustee in relation to the issue, sale or transfer of debentures.
Similarly, by the amendment proposed in item 208,
the definition of the term life insurance company in
section 121AB of the Income Tax Assessment Act 1936 (the
ITAA 1936) will be confined to life companies and will not include
their NOHCs. Such a restriction reflects the fact that the
definition of general insurance company in section 121AB
is confined to general insurance companies and does not include
their NOHCs either.
The Acts which are to be amended by Part 2 are:
- Australian Prudential Regulation Authority Act
1998
- Authorised Non-operating Holding Companies Supervisory Levy
Imposition Act 1998
- Corporations Act
- Financial Institutions Supervisory Levies Collection Act
1998
- Financial Sector (Business Transfer and Group Restructure)
Act 1999
- Financial Sector (Collection of Data) Act 2001
- Financial Sector (Shareholdings) Act 1998
- First Home Saver Accounts Act 2008
- ITAA 1936
- Income Tax Assessment Act 1997
- Insurance Acquisitions and Takeovers Act 1991
- Insurance Act 1973
- Life Insurance Supervisory Levy Imposition Act
1998
- Pooled Development Funds Act 1992
- Retirement Savings Accounts Act 1997
- Social Security Act 1991
- Superannuation Industry (Supervision) Act 1993
- Superannuation (Unclaimed Money and Lost Members) Act
1999, and
- Veterans Entitlements Act 1986.
As stated by the Assistant Treasurer in his second reading
speech, the harmonised provisions in Schedule 2 to the Bill will
enable APRA to seek a comprehensive and consistent set of
injunctions in appropriate circumstances .[41]
Part 1 amends section 65A of the Banking Act to
bring the provision into line with the injunction provisions in
other prudential legislation. The existing provision is not
particularly different from the ideal (wide-ranging and harmonised)
provision (such as either exists or is to be inserted in all the
prudential legislation by Schedule 2), and so only minor amendments
need to be made to existing section 65A.
Part 2 amends section 129D of the Insurance Act
by repealing the existing provision in its entirety and
substituting the ideal injunction provision. Currently APRA may
only seek an injunction against a general insurer where the insurer
has failed to comply with a determination of the Superannuation
Complaints Tribunal. The amended provision will empower APRA to
seek injunctions against insurance companies in a much broader
range of circumstances, including a contravention of the Insurance
Act, the Insurance Regulations 2002 or the prudential standards
applicable to general insurers; a contravention of a condition
imposed or specified under the Insurance Act; or a contravention of
a direction given by APRA under the Insurance Act. The conduct may
involve the realisation of one of these things; an attempt to do
one of these things; the aiding and abetting of one of these
things; and/or a conspiracy to engage in one of these things. The
amended version of section 129D of the Insurance Act will be in
virtually identical terms to the amended version of section 65A of
the Banking Act.[42]
Part 3 amends section 235 of the Life Insurance
Act by repealing the existing provision in its entirety and
substituting the ideal injunction provision. The terms of the
revised provision are almost identical to, but differ slightly
from, the terms of revised section 129D of the Insurance Act. Under
proposed section 235 of the Life Insurance Act,
the scope of conduct giving rise to the granting of an injunction
is expanded to include conduct that would constitute a
contravention of a direction given not only by APRA but also by the
Australian Securities and Investments Commission (ASIC) under the
Life Insurance Act.[43] As ASIC is jointly responsible with APRA for the
supervision of life companies, it seems sensible to make specific
reference to ASIC in the context of the circumstances when the
Federal Court may grant an injunction under the Life Insurance Act.
Further, under the revised provision, APRA will be able to seek an
injunction against NOHCs of life insurers, whereas the present
provision allows it only to seek an injunction against a life
insurer.
Part 4 amends section 315 of the SIS Act, which
is the injunction provision in that Act. In its current form, it is
very similar to the ideal injunction provision contained in the
Bill for all of the prudential legislation, and so only minor
amendment is needed to harmonise the provision with the injunction
provisions in other prudential legislation. Under the amendments to
subsection 315(1), the scope of conduct giving rise to the granting
of an injunction is expanded to include not only conduct that
constitutes a contravention of the SIS Act but also conduct that
contravenes a condition imposed on a Registrable Superannuation
Entity (RSE) under a RSE licence, or a direction given under the
SIS Act by ASIC or APRA or the Commissioner of Taxation (whichever
entity is responsible for the administration of the relevant
provision of the SIS Act under which the condition was
imposed).[44] As is
the case with the other prudential Acts, revised section 315 will
apply not only to completed actions, but also to activities such as
attempts to contravene the SIS Act; aiding and abetting; and
conspiring to contravene the SIS Act although it should be noted
that this is already the case with the present drafting of section
315 too.
Part 5 amends the First Home Saver Accounts
Act 2008 (the FHSA Act) to include a provision dealing with
injunctions for the breach of conditions attached to authorisations
granted under the FHSA Act for a person or entity to act as a first
home saver account (FHSA) provider. The difficulty with the
amendment is that the provision is not spelt out in full (which
would make it more readily accessible to a user of the FHSA Act),
but relies on a cross-reference to subsection 114(2) and section
315 of the SIS Act.[45] The effect of the amendment is that superannuation
trustees that offer FHSAs who contravene (or attempt to contravene
etc) the FHSA Act or conditions imposed on their authorisation as a
FHSA provider may become subject to a Federal Court injunction.
There is currently no injunction provision in the FHSA Act.
Part 6 states that the amendments made by
Schedule 2 apply to applications for injunctions made on or after
the date Schedule 2 commences, regardless of whether the conduct,
refusal or failure that gives rise to the application occurred
before or after that commencement date.
Concluding comments
As mentioned above, the Bill brings NOHCs of life insurers under
APRA s regulatory and supervisory umbrella, but a distinction
continues to be maintained between life companies and their NOHCs
for other purposes, including taxation, corporations law and the
first home saver accounts regime. The reason for maintaining the
distinction is not always obvious although it must be said that
usually NOHCs of life insurers are treated in the same way as NOHCs
of general insurers and ADIs.
The Bill also streamlines and harmonises APRA s powers to seek
court injunctions against entities under its regulation and
control. Currently APRA s powers to seek injunctions depend on the
Act under which it is operating and the type of entity against
which it seeks the injunction. Quite properly and sensibly, given
that all the entities involved are subject to APRA s oversight, the
Bill standardises and consolidates APRA s powers across the
spectrum of prudential legislation.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
2795.
Morag Donaldson
28 April 2009
Bills Digest Service
Parliamentary Library
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