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FINANCIAL SECTOR REFORM (AMENDMENTS AND TRANSITIONAL PROVISIONS) REGULATIONS 1999 1999 NO. 144
EXPLANATORY STATEMENTStatutory Rules 1999 No. 144
Issued by the Authority of the Minister for Financial Services and Regulation
Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999
Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999
Section 23 of Schedule 8 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (the FSR Act), which received Royal Assent on 17 June 1999, provides that the Governor-General may make regulations that deal with transitional, savings or application matters for the purposes of the FSR Act.
These regulations constitute part of the second stage of the financial system reforms involving the transfer of State and Territory-based institutions including friendly societies, building societies, credit unions and special services providers (SSPs) to the Commonwealth prudential regulatory regime. These follow on from amendments to the Banking Act 1959 (the Banking Act), the Life Insurance Act 1995 (the Life Insurance Act) and other transitional legislative provisions made in the FSR Act which were designed to accommodate the transferring institutions within the Commonwealth regime.
The regulations cover a broad range of issues which are set out below:
Protection of Information Given to APRA or ASIC
Dealing with documents and records to be transferred to the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
The regulation is intended to preserve the 'protected' status that applies to documents and records of the Australian Financial Institutions Commission (AFIC) and the State Supervisory Authorities (SSAs) compiled or generated under the State and Territory financial institutions regime that will be made available to APRA and ASIC as a result of the regulatory transfer.
The regulation is drafted so that it will become effective from 9 June 1999, the date upon which the Minister's powers were formally delegated to officers of APRA and ASIC, enabling them to enter into agreements to transfer staff, records and data, and assets and liabilities that are the subject of the regulatory transfer. Paragraph 22(5)(a) of Part 3 of Schedule 8 of the FSR Act permits transitional regulations to be expressed to take effect from a date before they are notified in the Gazette, despite subsection 48(2) of the Acts Interpretation Act 1901.
Instruments
Dealing with instruments (ie. modifications of the application of provisions of the Australian Financial Institutions Commission Code (AFIC Code), the Financial Institutions Code (FI Code) or the Friendly Societies Code (FS Code) in respect to an entity or class of entities) after the transfer date. The regulations deal with the instruments in the following manner:
- A small number of instruments have been preserved for transferring friendly societies;
- The remaining instruments cease to apply from the transfer date as many of them are no
longer relevant. However, within 18 months of the transfer date, APRA and ASIC have the
ability to declare, in writing, that such an instrument continues to be in force (if
appropriate), with or without modification, either individually or as a specified class.
Transfers of Engagements and Mergers
Allowing transfers of engagements and mergers that have progressed beyond a certain stage prior to the transfer date to be completed under the legislation under which they commenced.
- The regulation prescribes that certain Commonwealth legislation does not apply to such processes. This enables their completion under the relevant State regime.
The Banking Act 1959
* Dealing with an instance where a proposed society or an SSP has lodged an application to register
as a society or an SSP with an SSA prior to the transfer date and the processing of that application
has not been completed prior to the transfer date.
There may arise an instance where a proposed society (or an SSP) has lodged an application
to register with an SSA under section 115 (and 115B) of the FI Code (or an SSP under
section 36 of the AFIC Code) prior to the transfer date and the processing of that application
has not been completed before regulatory authority passes to the Commonwealth. This
regulation deems that, in this case, the. application is an application for authority to carry on
banking business submitted to APRA under section 9 of the Banking Act. This allows
APRA to carry through the processing of this application without requiring the applicant to
re-lodge its application. A provision is included that allows APRA to request
supplementary information from the applicant in order to assist APRA in finalising such
applications.
* The preservation of the AFIC Code prudential standards as transitional prudential standards
issued by APRA.
- All bodies regulated under the FI Code have been subject to prudential standards issued
under sections 28, 30 and 31 of the AFIC Code. Institutions regulated under the
Commonwealth regime are subject to prudential standards issued under section 11AF of the
Banking Act. Institutions that are transferring from the State and Territory regulatory
regime to the Commonwealth regime may be subject to considerable adjustment costs and
disruption if they were compelled to switch from one prudential framework to another over
a very short period of time. This regulation preserves the bulk of the AFIC Code prudential
standards for the transferring institutions as APRA transitional prudential standards. The
regulation explicitly omits a number of regulations that have no application in the
Commonwealth regime.
- It should be noted that the AFIC Code prudential standards that deal with statistical
reporting have also been preserved for a transitional period until APRA has had time to
issue a new set of harmonised reporting requirements. A separate regulation also modifies
the application of the Banking Act so that large transferring institutions will continue
providing information previously provided under the Financial Corporations Act 1974 (see
the Banking (Statistics) Amendment Regulations 1999).
* Addressing transitional issues arising from wind-ups being conducted under the Corporations Law
where all debts and claims generally rank equally and the fact that, under the Banking Act,
depositors in an Authorised Deposit-taking Institution (ADI) receive first priority (over creditors
and shareholders) on the assets of the ADI in the event of a wind-up.
- The purpose of the regulation is to ensure that the rights of creditors and depositors are
unaffected by the transfer in the event that a building society, credit union or special service
provider has commenced, but not completed, wind-up on the transfer date. That is, creditors and depositors in a credit union or building society being wound-up would have equal claims on the assets of the institution being wound-up.
The preservation of any ongoing enforcement, investigation or inspection activities being undertaken by the State regulators that span the transfer date.
As part of their regulatory powers, AFIC and the SSAs have recourse to various enforcement powers under both the AFIC Code and the FI Code. These include the power to obtain information, to appoint a liquidator, to place a society under direction, to appoint an administrator, and to appoint a special investigator. (Transfers of engagements, wind-up and standards-making powers are dealt with separately in other legislation and regulations.) APRA has similar enforcement powers under the Banking Act including the power to appoint an investigator (s13, s13A and s61), issue directions (s11CA), appoint a statutory manager (s13C) and the power to apply to wind-up an ADI (s14E).
As a consequence of the transfer, there may arise an instance where AFIC or an SSA has initiated some enforcement action that has not been completed prior to the transfer date. The States' financial. sector reform legislation (eg. Division 4 of the Financial Sector Reform (Queensland) Act 1999) continues the application of various State enforcement provisions in regard to actions done before the transfer date and allows APRA and ASIC to take over where the State authorities left off.
This regulation addresses the gaps left as a result of the State legislation's interface with the Banking Act. Moreover, the regulation makes it clear that actions that commenced under the State regime can lead to subsequent actions being taken under the Banking Act - eg. investigations conducted under the FI Code could lead to the appointment of a statutory manager under the Banking Act.
Transitional issues arising out of the interface between the Banking Act unclaimed moneys provisions, the FI Code dormant accounts provisions and the States' and Territories' financial sector reform legislation.
- Section 69 of the Banking Act deems moneys in accounts with ADIs to be unclaimed if they
have not recorded a bona fide transaction for a period of seven years. Section 138A of the
FI Code makes provision for closing dormant accounts if the account has not recorded a
transaction for a period of one year. In order for unclaimed moneys arrangements in
transferring institutions to be compatible with the Commonwealth unclaimed moneys
regime, the States legislation (eg. section 70 of the Financial Sector Reform (Queensland)
Act 1999) deems that all dormant account moneys held in holding accounts are transferred
back to the original account. For the sake of clarity, this regulation deems that this transfer
of moneys back to the original accounts is not a transaction for the purposes of section 69 of
the Banking Act and does not reset the seven year Banking Act trigger.
Financial Sector (Shareholdings) Act 1998
The transferring of institutions to the Financial Sector (Shareholdings) Act 1998 (FSSA).
- The purpose of the regulation is to ensure that that the 18 month shareholding transitional
provision is not invalidated as a result of transferring financial institutions breaching the
FSSA on the transfer date purely due to the change in the definition of associates and
fluctuations in shareholdings caused by factors outside of the shareholders control, such as
the members leaving the society by ceasing to hold deposits with the institution.
Clause 45 of Schedule 7 of the FSR Act provides persons owning a stake in a transferring financial sector company (credit unions, building societies and friendly societies) with 18 months to seek any necessary approvals under the FSSA. This regulation applies to persons that held a stake of more than 15 per cent in a transferring financial sector company immediately before the transfer date and were not in contravention of the FI Code and the FS Code.
Addressing an instance where a transferring society from the Northern Territory has been given an exemption in regard to certain shareholding.
- The regulation excludes certain shareholdings of the National Mutual Health Insurance Pty
Ltd (NMHI) held in the Territory Mutual Building Society Limited from the scope of the
FSSA. This exclusion continues the position that existed for NMHI with respect to these
shareholdings under the FI Code.
- The exemption is subject to NMHI adhering to the conditions imposed on it by the Territory
Supervisory Authority of the Northern Territory on 26 March 1998. The regulation
continues to have effect until 26 May 2008.
The Life Insurance Act 1995
* Providing further detail for the definition of a transferring friendly society by stating that the
society must have been a friendly society for the purposes of one of the specified FS Codes
immediately before the transfer date.
* Providing for specified AFIC Prudential Standards for friendly societies to continue to have effect
after the transfer date for the purposes of the Life Insurance Act.
* Dealing with applications by friendly societies that had commenced under the FS Code but had
not been determined before the transfer date. For example, applications for approval to establish a
benefit fund.
* Dealing with enforcement action or administration that had commenced under the FS Code and
breaches of the FS Code. For example, the regulation provides that enforcement action that had
commenced is able to be continued, or taken to have been conducted under the Life Insurance
Act. The regulation also enables directions given to friendly societies immediately before the
transfer date to continue to have effect after the transfer date as if it were a direction given under
the Life Insurance Act.
Details of the regulations appear at Attachment A.
Parts 1 and 2 commenced on gazettal. The balance of the regulations commenced on the commencement of Schedule 4 of the FSR Act.
ATTACHMENT A
FINANCIAL SECTOR REFORM (AMENDMENTS AND TRANSITIONAL PROVISIONS) REGULATIONS 1999
Regulation 1 - Name of the regulations
Regulation 1 provides that these regulations are the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999.
Regulation 2 - Commencement
This regulation provides that these regulations commence on the date that Schedule 4 of the FSR Act commences.
However, proposed Parts 1 and 2 will commence upon Gazettal.
Regulation 3 - Definitions
Regulation 3 provides definitions that are used in the balance of these regulations.
Regulation 4 - Purpose of these regulations
This regulation outlines the purpose of these regulations. These are to address transitional, savings and applications issues arising out of the transfer of State and Territory regulated financial institutions to the Commonwealth regulatory regime.
PART 2 - TRANSITIONAL PROVISION FOR PROTECTION OF INFORMATION GIVEN TO APRA OR ASIC
Regulation 5 - Protection of information given to APRA or ASIC
This Regulation deals with documents and records that are made available or otherwise given to APRA and ASIC by AFIC or the SSAs (or their legal successors) as a result of, or following, the regulatory transfer.
Subregulation 5(1) defines the scope of information that is intended to be protected. It includes information that was previously protected in accordance with the relevant governing legislation that applied prior to the transfer date. It may also include the corporate files and working documents of AFIC and the former SSAs which are of such a nature that they were not previously publicly available. Information may be given to APRA or ASIC on a temporary basis (remaining the property of the relevant State or Territory) or it may be transferred to APRA or ASIC permanently under a transfer agreement.
9 June 1999 is the date upon which the Minister's powers were formally delegated to officers of APRA and ASIC, enabling them to enter into agreements to transfer staff, records and data, and assets and liabilities that are the subject of the regulatory transfer. Paragraph 22(5)(a) of Part 3 of Schedule 8 of the FSR Act permits transitional regulations to be expressed to take effect from a date before they are notified in the Gazette, despite subsection 48(2) of the Acts Interpretation Act 1901.
Subregulation 5(2) provides that where information (as defined by Subregulation 5(1)) is made available to APRA, it is deemed to be captured by the secrecy provisions contained in Part 6 of the APRA Act.
Subregulation 5(3) provides that where information (as defined by proposed Subregulation 5(1)) is made available to ASIC, it is deemed to be captured by the confidentiality and secrecy provisions contained in Division 2 of Part 7 of the Australian Securities and Investments Commission Act 1998 (ASIC Act).
Subregulation 5(4) clarifies the meaning of certain terms for the purposes of this regulation.
PART 3 - TRANSITIONAL PROVISIONS RELATING TO CERTAIN INSTRUMENTS IN FORCE ON THE TRANSFER DATE
Division 3.1 - Instruments under the Friendly Societies Code or AFIC Code
Regulation 6 - Continued effect of certain instruments relating to transferring friendly societies
This regulation provides for certain instruments made by an SSA under an FS Code or AFIC Code that applied immediately before the transfer date to continue to have effect in relation to the friendly society after the transfer date. Subregulation 6(1) and 6(2) specify the instruments made under either an FS Code or the Prudential Standards issued by AFIC. Subregulation 6(3) provides that instruments specified in Subregulation 6(1) and 6(2) that had effect in relation to a transferring friendly society immediately before the transfer date continues to have effect in relation to the society after the transfer date.
Subregulations 6(4) to 6(6) provide for the following interpretations of the instruments after the transfer date:
* a reference to AFIC or an SSA is to be read as a reference to APRA; and
* a reference to the specified AFIC Prudential Standards is to be read as a reference to the comparable actuarial standards made under section 101 of the Life Insurance Act.
Subregulation 6(7) enables APRA to vary, revoke or modify the instrument in writing.
Division 3.2 - Instruments for which no other arrangements are in force on the transfer date
Regulation 7 - Definition for Division 32
This regulation defines the term transferring body for this Division.
Regulation 8 - Continued effect of certain instruments made under replaced legislation
Regulation 8 applies to instruments made by AFIC or an SSA under the replaced legislation which was in force immediately before the transfer date and which is not carried over by the legislation, any other regulation or any other instrument made under the FSR Act.
Subregulation 8(2) enables APRA to determine that an instrument has continued to have effect since the transfer date.
Subregulation 8(3) enables the determination to make modifications. A determination cannot be made by APRA more than 18 months after the transfer date.
Subregulation 8(5) requires APRA to consult with ASIC prior to making a determination if it relates to a matter for which ASIC has responsibility.
PART 4 - TRANSITIONAL PROVISIONS RELATING TO TRANSFERS OF ENGAGEMENTS AND MERGERS
Regulation 9 - Completion of Transfers of Engagements and Mergers commenced before the transfer date
This regulation complements the primary legislation and allow transfers of engagements and mergers that have progressed beyond a certain stage prior to the transfer date to be completed under the replaced legislation. It is necessary to prescribe that certain Commonwealth legislation does not apply during such processes in order to enable their completion under the relevant State regime. Accordingly, the Financial Sector (Transfers of Business) Act 1999 and the Insurance Acquisitions and Takeovers Act 1991 would not apply to such transfers.
PART 5 - TRANSITIONAL PROVISIONS RELATING TO THE APPLICATION OF THE BANKING ACT 1959
Division 5.1 - Continuing applications for registration under a Financial Institutions Code
Regulation 10 - Treatment of undetermined applications under a Financial Institutions Code
Where there has been an application for registration lodged by a proposed society under section 115 or a building society under section 115B of the FI Code and the application has not be determined prior to the transfer date, Subregulation 10(3) specifies that the application is deemed to be an application made under subsection 9(2) of the Banking Act for an authority to conduct banking business. Applicants are therefore not required to resubmit their applications.
Subregulation 10(4) allows APRA to request additional information from the applicant where the existing application is inadequate for APRA to finalise the determination of the application. Subregulation 10(5) specifies that APRA can delay the determination of the application until any information requested under Subregulation 10(4) has been received.
Division 5.2 - Prudential Standards
Regulation 11 - Definitions for Division 52
This regulation makes definitions for the purposes of this Division.
Regulation 12 - APRA transitional prudential standards
Regulation 12 provides that the prudential standards set out in Schedule 1 are preserved as APRA transitional prudential standards and are to be administered by APRA. This regulation also notes that there are to be some preserved prudential standards which are also to be administered by ASIC as jointly administered transitional standards.
Regulation 13 - Application of APRA transitional prudential standards
This regulation specifies that a transitional prudential standard applies to a transferring society that was, before the transfer date, a FIC body and to which the preserved standard applied before the transfer date.
Under the pre-transfer arrangements individual prudential standards applied to specific classes of institutions such as building societies or credit unions. These distinctions are not preserved in the posttransfer environment, however, a transitional prudential standard should continue to apply to the entities to which it applied prior to the transfer.
Regulation 14 - Application of instruments under APRA transitional prudential standards
This regulation preserves the application of an instrument that had been made by AFIC or an SSA prior to the transfer date under an AFIC prudential standard that have become a transitional prudential standard and that related to a transferring institution. These instruments include approvals, determinations, directions, exemptions, notices etc.
Regulation 15 - Interpretation of APRA transitional prudential standards and instruments
This regulation translates references to AFIC or the SSAs in the transitional prudential standards to mean APRA. The Regulation also specifies that where a transitional prudential standard refers to a power exercised by AFIC or an SSA under the transitional prudential standards, instruments made under the transitional prudential standard or any other Commonwealth or State law that relates to the operation of the transitional prudential standards, this power is to be assumed by APRA.
Subregulation 15(4) deals with instances where a transitional prudential standard refers to an AFIC prudential standard that has not be preserved in these regulations, or a provision of the FI Code, the AFIC Code or a provision of an instrument made under the Codes. These references should be read in such a way that preserves the intention of these transitional arrangements, and does not alter the functioning of the transitional prudential standards. Moreover, they should be read in a way that is consistent with APRA's role as the prudential regulator of the financial system.
Regulation 16 - Variation, revocation and modification of APRA transitional prudential standards and instruments
Consistent with APRA standards making powers as articulated in section 11AF of the Banking Act, this regulation provides for APRA to be able to vary, revoke or modify the transitional prudential standards. APRA is also able to vary, revoke or modify instruments that have been made under the transitional prudential standards.
Subregulation 16(2) specifies that APRA should follow the conditions laid out in subsections 11AF(4) to (6A) of the Banking Act when it proposes to vary, revoke or modify a transitional prudential standard. When doing so, APRA is required to publish the changes in the Gazette and in newspapers. APRA is also required to make copies of the modified or varied versions of the transitional prudential standard readily available to the public.
Subregulation 16(3) deals with transitional standards that are jointly administered by ASIC. APRA must consult with ASIC before it varies, revokes or modifies a jointly administered transitional standard.
Regulation 17 - Relationship between APRA transitional prudential standards and the Banking Act 1959
This regulation provides that, in addition to the powers and functions of APRA in the transitional prudential standards as outlined above, APRA may deal with the transitional prudential standards as per the provisions of the Banking Act that relate to prudential standards.
Regulation 18 - Inspection and purchase of APRA transitional prudential standards and instruments
This regulation requires that APRA make the transitional prudential standards, and any instruments made under the transitional prudential standards, readily available for inspection and purchase.
Division 5.3 - Priority of Assets
Regulation 19 - Application of Financial Institutions Codes to FIC bodies in liquidation
Regulation 19 continues to apply the repealed legislation, as in force immediately before the transfer date, to an FIC body for which a liquidator was appointed.
Subregulation 19(3) notes that the result of this Regulation is to ensure that subsection 13A(3) of the Banking Act relating to the priority of assets in the event of a wind-up does not apply to the liquidation of the FIC body.
Subregulation 19(4) enables APRA to terminate the liquidator's appointment in the way authorised by the FI Code.
Division 5.4 - Enforcement action
Regulation 20 - APRA may take enforcement action
Regulation 20 specifies that APRA may take actions in an instance where AFIC or an SSA has commenced an enforcement action prior to the transfer date and that action has not been completed prior to the transfer date.
Subregulation 20(2) makes pro-vision for APRA to apply to the Supreme Court to revoke an injunction granted to AFIC under section 50 of the AFIC Code.
Subregulation 20(3) makes provision for APRA to terminate the appointment of a person appointed as an inspector by AFIC under section 53 of the AFIC Code or by an SSA under section 77 of the FI Code. The revocation of the appointment of such an inspector is to be done by an instrument given to the person.
Subregulation 20(5) outlines details of the instrument that revokes the appointment of an inspector.
Subregulation 20(3) provides for APRA to be able to confer on an inspector any of the powers of an inspector appointed under the Banking Act as per subsection 13(4) and sections 13A, 13B and 61 of the Banking Act. These conferred powers supplement those conferred on the inspector in the Code under which they were originally appointed.
Regulation 21 - Action taken to be done by APRA
This regulation provides that a request for information made by AFIC under section 51 of the AFIC Code or by an SSA under section 75 of the FI Code, which has not been complied with prior to the transfer date, is deemed to be a request for information made by APRA under section 62 of the Banking Act. As a result, APRA has recourse to any related enforcement provisions in the Banking Act.
Regulation 22 - Continued effect of appointment as administrator (La Trobe Country Credit Cooperative Ltd)
This regulation provides that, if the appointment of the administrator to La Trobe Country Credit Cooperative Ltd has not been terminated prior to the transfer date, the administrator is deemed to have been appointed under section 13A(1) of the Banking Act. This appointment was originally made under pre-FI Code legislation and was preserved under the FI Code scheme.
Regulation 23 - Continued effect of certain instruments and actions
Subregulation 23(2) provides that evidence obtained under section 52 of the AFIC Code or section 76 of the FI Code can be used by APRA as a prerequisite for the application of Banking Act enforcement powers. For example, evidence obtained about a breach of an AFIC Code prudential standard that occurred before the transfer date could be used by APRA to appoint a section 13 investigator; or to apply a penalty as provided for in the preserved sections of the Codes.
Subregulation 22(3) deals with the power of an SSA to place a society under direction under section 88 of the FI Code and the power of an SSA to suspend the operations of a society under section 89 of the FI Code. These provisions mirror those in section 11CA of the Banking Act. Any directions or suspensions that have not been revoked prior to the transfer date are deemed to have been directions issued by APRA under section 11CA of the Banking Act.
Subregulation 22(4) deals the appointment of an administer under section 90 of the FI Code. Section 13C and sections 14A to 16A of the Banking Act make provision for the appointment of a statutory manager and outline the powers and obligations of the statutory manager. This subregulation deems that an administrator appointed under the FI Code, whose appointment has not been terminated before the transfer date, has been appointed by APRA under the Banking Act and that the administrator is subject to all of the provisions in the Banking Act dealing with appointed administrators.
Subregulation 22(5) deals the appointment of a special investigator under section 348 of the FI Code whose appointment spans the transfer date. This subregulation deems the special investigator had been appointed by APRA under section 61 of the Banking Act.
Division 5.5 - Unclaimed Moneys and operation of accounts
Regulation 24 - Definition for Division 4.5
Regulation 24 provides a definition of the term society used in this Division.
Regulation 25 - Application of Banking Act 1959 to transfer to account
Regulation 25 specifies that this regulation applies when a society has determined that an account is dormant as per section 138A of the Fl Code. If so, the society is able to transfer the balance of the account to another account and close the dormant account. The regulation also specifies that this regulation relates to the operation of the unclaimed moneys provisions of the Banking Act.
Subregulation 25(2) disapplies this regulation when the society is in wind up at the transfer date as per section 340 of the FI Code.
Subregulation 25(3) determines that a transfer in another account under section 138A of the FI Code is deemed not to be a withdrawal for the purposes of subsection 69(1) of the Banking Act; that is this transfer does not reset the seven year rule specified under section 69 of the Banking Act.
Likewise, subregulation 25(4) specifies that the debiting of fees or charges as a result of the transfer of the balance of a dormant account to another account (as per subsection 138A(2) of the FI Code) is deemed not to be a withdrawal for the purposes of subsection 69(1) of the Banking Act.
Likewise, subregulation 25(5) specifies that the crediting of interest to the dormant account or the other account is deemed not to be a deposit for the purposes of subsection 69(1) of the Banking Act.
Subregulation 25(6) determines that the transfer of dormant accounts moneys to another account does not constitute an operation on the dormant account for the purposes of section 69 of the Banking Act.
Regulation 26 - Application of Banking Act 1959 to transfer from account
The States' and Territories' Financial Sector Reform Acts include a provision that deems that all moneys that were transferred to other accounts under section 138A of the FI Code are transferred back to the original dormant account so that arrangements in transferring societies are compatible with the unclaimed moneys arrangements in the Banking Act.
Regulation 26 deems that this transfer of moneys back to the original dormant account is not a deposit for the purposes of subsection 69(1) of the Banking Act; that is this transfer does not reset the seven year rule specified under section 69 of the Banking Act.
The subregulations in this Regulation mirror those in Regulation 25.
Regulation 27 - Application of Banking Act 1959 to date of transfer of money to another account
This regulation deals with an instance where a society does not have ready or reasonable access to the transaction records of an original dormant account. Normally, given the arrangements outlined above, the Banking Act seven year rule would commence on the date of the last transaction made on the account by the owner of the account. However, in an instance were a society is unable to determine the date of the last transaction, or it is not practicable for the society to do so, this Regulation deems that, for the purposes of section 69 of the Banking Act, the last transaction is the date on which that account is deemed to be dormant as per section 138A of the FI Code and the balance of the account is transferred to another account.
Subregulation 27(3) disapplies this regulation when the society is in wind up at the transfer date as per section 340 of the FI Code.
PART 6 - TRANSITIONAL PROVISIONS RELATING TO THE APPLICATION OF THE FINANCIAL SECTOR (SHAREHOLDINGS) ACT 1998
Regulation 28 - Definitions for Part 6
Regulation 28 defines two terms for the purposes of this Part.
Regulation 29 - Stake in transferring body exceeding 15% on transfer day as a result of interests Of associates
Regulation 29 ensures that a person does not breach the requirements of FSSA as a consequence of the operation of the definition of associate in clause 4 of Schedule1 of that Act where the holding of the stake did not breach the replaced legislation. A person in this position is taken to have been approved by the Treasurer to hold the same percentage stake in the company under the subregulation 29(4) for a period of 18 months from the transfer date.
Regulation 30 - Stake in transferring body exceeding 15% after transfer day as a result of circumstances outside stakeholder's control
Regulation 30 ensures that a person does not breach the requirements of the FSSA as a consequence of circumstances outside of that person's control. Under the Subregulation 30(2), a person in this position is taken to have been approved by the Treasurer to hold the same percentage stake in the company on the date the change in the person's stake takes place.
Under subregulation 30(3), the approval starts on the day that the change in the person's stake takes place and ends 18 months after the transfer date.
Regulation 31 - National Mutual Health Insurance Pty Ltd's shares in Territory Mutual Building Society Limited
Regulation 31 excludes shares held by National Mutual Health Insurance Pty Ltd in Territory Mutual Building Society Limited immediately before the transfer date from being part of a stake for the purposes of the FSSA.
This regulation ceases to apply if National Mutual Health Insurance Pty Ltd fails to comply with the conditions mentioned in Schedule D of the exemption issued to it, dated 26 May 1998, and made under section 199 of the Financial Institutions (NT) Code of the Northern Territory.
Subregulation 31(5) specifies that this Part ceases to apply at the end of 26 May 2008.
PART 7 - TRANSITIONAL PROVISIONS RELATING TO THE APPLICATION OF THE LIFE INSURANCE ACT 1995
Division 7.1 - Friendly societies taken to have been registered
Regulation 32 - Friendly Societies taken to have been granted registration under section 21 of the Life Insurance Act 1995
Item 11 of Schedule 8 of the FSR Act provides a mechanism for registering friendly societies under the Life Insurance Act. The transferring friendly societies must meet the following criteria:
* immediately before the transfer date the company was a friendly society (paragraph 11(1)(a));
* the company carried on business through one or more eligible benefit funds; an eligible benefit fund is one that had approval under the FS Code or was deemed to have been established under the transitional provisions of the Code and does not relate to health insurance business (paragraph
* the company was not winding up immediately before the transfer date (paragraph 11(1)(c)); and
* the company is specified in regulations for these purposes (paragraph 11(1)(d)).
Regulation 32 specifies as a transferring friendly society (for the purposes of paragraph 11 (1)(d) of Item 11 of Schedule 8) any company that is, immediately before the transfer date, a society for any of the specified FS Codes.
Regulation 31 specifies the FS Code of each State and Territory. (Note that the Australian Capital Territory does not have a FS Code, nor any friendly societies, and therefore is not specified.)
Division 7.2 - Continued effect of certain standards in force for friendly societies on the transfer date
Regulation 33 - Continued effect of certain prudential standards for friendly societies
Under section 28 of the AFIC Code, AFIC issued Prudential Standards for Friendly Societies (Book 6). From the transfer date most of the requirements in these standards have been reapplied to friendly societies in the form of actuarial standards (made by the Life Insurance Actuarial Standards Board under section 101 of the Life Insurance Act), Prudential Rules or Prudential Standards.
Regulation 33 provides for certain AFIC prudential standards (specified in Subregulation 33(1)) that are not being reissued as actuarial standards, Prudential Rules or Prudential Standards to continue in effect for the purpose of the provisions of the Life Insurance Act applying to friendly societies.
ASIC also has a role in administering those parts of Prudential Standard 6.7 (see paragraph 33(1)(g)) that relate to disclosure and the offering of products from the funds management scheme. Accordingly, those parts of Prudential Standard 6.7 are also preserved in the Corporations Regulations 1990.
Regulation 34 - Interpretation of continued prudential standards
This regulation provides an interpretation of a prudential standard to which regulation 33 applies.
Subregulations 34(2) and 34(3) translate references in those prudential standards to AFIC or an SSA, or a power exercised by AFIC or an SSA, as if they were a reference to APRA, or a power of APRA.
Subregulation 34(4) deals with references in the preserved AFIC prudential standard to another AFIC prudential standard or a provision of the FS Code. These references are to be read in such a way that is consistent with, and promotes, the transitional arrangements, is consistent with APRA's powers, functions and responsibilities and does not alter the interpretation or operation of the prudential standards.
This regulation serves a similar objective as regulation 15 in Division 5.2.
Division 7.3 - Matters in progress on the transfer date
Regulation 35 - Applications for registration
Regulation 35 applies to an application for registration as a friendly society, under section 60 of FS Code, that has not been determined by the SSA before the transfer date. The effect of the Regulation is that the SSA transfers the application to APRA so that it can be treated after the transfer date as an application for registration under section 20 of the Life Insurance Act.
As the information provided by an applicant for registration under the FS Code might differ from that required under the Life Insurance Act, APRA may seek additional information from the applicant before being able to make a decision on registration (see Regulation 38).
Regulation 36 - Applications for approval to establish a benefit fund
This regulation applies in respect to an application for approval to establish a benefit fund under section 98 of the FS Code that has not been determined by the SSA before the transfer date. The effect of the regulation is that the SSA transfers the application to APRA so that, after the transfer date, it can be treated as an application for approval of benefit fund rules under section 16L of the Life Insurance Act.
As the information provided by an applicant for the establishment of a new benefit fund under the FS Code might differ from that required under the Life Insurance Act, APRA may seek additional information from the applicant before being able to make a decision under section 16L (see Regulation 38).
Regulation 37 - Applications for approval of amendments of benefit fund rules
This regulation applies in respect to an application for registration of an amendment of a friendly societies benefit fund rules under section 74 of the FS Code that has not been determined by the SSA before the transfer date. The effect of the Regulation is that the SSA transfers the application to APRA so that it can be treated after the transfer date as an application for approval of an amendment of approved benefit fund rules under section l6Q of the Life Insurance Act.
As the information provided by an applicant for the amendment of benefit fund rules under the FS Code might differ from that required under the Life Insurance Act, APRA may seek additional information from the applicant before being able to make a decision under section l6Q (see Regulation 38).
Regulation 38 - Additional Information
This regulation enables APRA to seek in writing additional information from the applicant to ensure that applications dealt with in regulations 35, 36 and 37 comply with the Life Insurance Act or to assist APRA in determining the application. Subregulation 38(2) provides that APRA is not required to determine the application before it receives the information so requested.
Regulation 39 - Approval of consequential amendments of company's constitution
This regulation enables a friendly society to lodge with APRA an application under section 16U of the Life Insurance Act (for approval of consequential amendments of the company's constitution) if.
* an application for approval of benefit fund rules is deemed to be a section 16L application (under regulation 36); or
* an application for amendment of benefit fund rules is deemed to be a section l6Q application (under regulation 37).
Regulation 40 - Continued application of Friendly Societies Code for certain amendments
This regulation applies to a transferring friendly society that amended its rules under section 73 of the FS Code before the transfer date and registered these amendments under section 74 of the FS Code but had not given a notice to its members as required by subsection 73(2) of the FS Code, ie. if the amendment had been approved by a resolution of the Board. The regulation requires the friendly society to provide the notice to its members after the transfer date in accordance with the requirements of the FS Code.
Division 7.4 - Enforcement action in relation to friendly societies
Regulation 41 - Definitions for Division 7.4
The regulation defines terms that are used in Division 7.4.
Regulation 42 - Continued effect of applied enforcement provisions of AFIC Codes and Friendly Society Codes
The regulation applies if AFIC or an SSA was taking enforcement action in relation to a transferring friendly society under the parts of the AFIC Code or the FS Code specified in Paragraph 42(1)(a) and, on the transfer date, the enforcement action had not been completed.
Subregulation 42(2) provides for APRA to continue that enforcement action after the transfer date. In doing so, APRA is to perform any function or exercise any power in relation to the applied enforcement provisions of the relevant Code. To the extent that the enforcement powers of the Life Insurance Act differ from the applied enforcement provisions of the Codes, APRA may perform any function, or exercise any power, in accordance with those provisions of the Life Insurance Act.
* The term applied enforcement provisions is given its meaning by subregulation 42(3).
Regulation 43 - Investigations of business of friendly societies
The regulation applies in relation to an investigation of the business of a friendly society if, immediately before the transfer date, AFIC or an SSA:
* was taking enforcement action in relation to a transferring friendly society under the AFIC Code
or the FS Code and, on or after the transfer date, APRA continues the investigation in accordance
with subregulation 42(2); see subregulation 43(2); or
* had completed an investigation of the business of a transferring friendly society under the AFIC
Code or the FS Code and had taken no further action in relation to the finding of the investigation;
see subregulation 43(3).
Under the regulation the investigation of the friendly society is taken to have been conducted under Division 3 of Part 7 of the Life Insurance Act. One effect of this regulation is that, after the transfer date, further action could be taken, in accordance with the requirements of the Life Insurance Act, to place the friendly society under judicial management (under section 158 of the Act) or to have the friendly society wound up (under section 181 of the Act).
Regulation 44 - Action for breach of AFIC Code, Friendly Societies Code or Life Insurance Act 1995
The regulation applies in relation to an investigation of the business of a friendly society that commenced before the transfer date and is continued by APRA after the the transfer date in accordance with subregulation 42(2). If the enforcement action finds that the friendly society had committed an offence against a provision of the relevant AFIC Code or FS Code, APRA may take action in relation to the offence in accordance with the applied enforcement provisions of the relevant Code that relate to the offence.
Regulation 45 - Continued effect of directions to friendly societies under section 44 or 45 of Friendly Societies Code
This regulation applies if, immediately before the transfer date, a direction given to a transferring friendly society was in force under section 44 or 45 of the FS Code. The regulation provides that the direction continued to have effect on and after the transfer date as if the direction were given to the friendly society by APRA under section 230B of the Life Insurance Act.
Regulation 46 - Continued effect of administration of friendly society under Part 2 of the Friendly Societies Code
This regulation applies if, immediately before the transfer date, the affairs of a transferring friendly society were being conducted by an administrator appointed under the FS Code. The regulation provides that the administrator is to continue to conduct the affairs of the friendly society after the transfer date in accordance with the provisions of the FS Code. However, Subregulation 46(3) provides that the administrator is to cease to conduct the affairs of the friendly society on the day a judicial management commences. This enables APRA to consider replacing the administrator with a judicial manager by seeking a Court order under section 158 of the Life Insurance Act. Subregulation 46(5) provides that an administrator's report that recommends that the friendly society be wound up is to be treated as if it were a report under section 175 of the Life Insurance Act.
SCHEDULE 1 - TRANSITIONAL PRUDENTIAL STANDARDS ADMINISTERED BY APRA
Schedule 1 is consequential to Regulation 12 and lays out the AFIC prudential standards that are to be preserved as APRA transitional prudential standards.
Items 1, 2, 3 and 4 outline which AFIC prudential standards are to become APRA transitional prudential standards.
Item 5 of this Schedule also preserves subsections 237(2) and 245(1) to (3) of the FI Codes as APRA transitional prudential standards. These provisions relate to the appointment of a chairman and management contracts; these provisions are important for the prudential regulation of transferring institutions over the transitional period and there are no equivalent powers in the Banking Act.
Item 6 preserves any urgent prudential standards made by AFIC prior to the transfer date that continued to be in force at the transfer date.
Item 7 preserves any modifications to prudential standards approved by AFIC prior to the transfer date that continued to be in force at the transfer date.