House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Assistant Treasurer, the Hon Chris Bowen MP)

Chapter 2 Injunctions

Outline of chapter

2.1 Schedule 2 of the Bill amends the Banking Act, Insurance Act, Life Insurance Act and SIS Act (collectively, the prudential Acts) to provide harmonised powers for APRA to seek court injunctions against breaches or contraventions of a provision of these Acts or breaches of conditions or directions issued under these Acts.

Context of amendments

2.2 The power to seek a court injunction is a strong enforcement power that enables APRA, with the sanction of the courts, to act immediately to protect relevant interests. It is expected that this power will only be used in very serious cases and where other enforcement powers are insufficient.

2.3 An injunctive power is particularly useful as an interim measure, until a final injunction order is made by the Court, to protect relevant interests while an investigation or other formal enforcement action is being undertaken or considered by APRA.

2.4 The power to take rapid and decisive action to deal with emerging prudential concerns and protect beneficiaries promotes confidence in the effectiveness of prudential supervision and the safety of the regulated sectors.

2.5 The Banking Act, Insurance Act, Life Insurance Act and SIS Act each contain a power for APRA to seek a court injunction. However, the circumstances under which an injunction may be sought vary significantly across the prudential Acts. Harmonising the injunction provisions under the prudential Acts would ensure APRA can respond in a timely and decisive way, where appropriate, to emerging prudential concerns.

Summary of new law

2.6 The amendments will harmonise the power to seek a consistent range of court injunctions under each of the prudential Acts, based on the range of injunctions available under the SIS Act. APRA would be able to seek an injunction where a person has engaged, or proposes to engage, in conduct that constitutes a contravention of the Act, or attempts, assists, induces or is knowingly concerned with a contravention of the relevant Act.

2.7 In addition, the harmonised provisions will enable APRA to seek an injunction where an entity has, or proposes to, engage in conduct that breaches the conditions imposed on the licence of an entity or directions given by APRA.

2.8 The harmonised injunctions provisions under the Banking Act, Insurance Act, Life Insurance Act and SIS Act would enable APRA to seek restraining, performance, consent and interim injunctions for conduct relating to breaches of the relevant Act.

2.9 Affected persons may currently seek these injunctions under the SIS Act, and these amendments do not affect their ability to continue to seek such injunctions under this Act.

2.10 The amendments to the SIS Act will also apply to superannuation trustees that offer First Home Saver Accounts under the First Home Saver Accounts Act 2008 .

Comparison of key features of new law and current law

Detailed explanation of new law

Banking Act

2.11 The Bill amends the Banking Act by repealing the existing paragraph 65A(1)(a) of the Act and inserting a new paragraph in its place, enabling restraining injunctions (preventing the doing of an act, or engaging in conduct) to be sought in circumstances where there has been a contravention of a provision of the Act, the regulations or the prudential standards, a condition imposed under the Act or a direction by APRA issued pursuant to the Act. [Item 1, Part 1 of Schedule 2 of the Bill, paragraph 65A(1 )( a) of the Banking Act]

2.12 Amendments to paragraphs 65A(1)(b) to (f) of the Act reflect APRA's ability to apply for an injunction in respect of a breach of a direction. [Item 2, Part 1 of Schedule 2 of the Bill, subsection 65A(1) of the Banking Act]

2.13 The Bill makes amendments to paragraph 65A(4)(a) of the Banking Act that have the effect of allowing performance injunctions (compelling the performance of an act or thing that a person is required to do) to be sought in a similar set of circumstances as the Bill provides for restraining injunctions. That is, for circumstances where a person has refused or failed to do an act or thing that is required to be done under the Act, the regulations or the prudential standards. [Item 3, Part 1 of Schedule 2 of the Bill, paragraph 65A(4 )( a) of the Banking Act]

2.14 The amendments to paragraph 65A(4)(b) and subsection 65A(9) reflect the broadened injunctions power, following the above amendments. [Items 4 to 6, Part 1 of Schedule 2 of the Bill, section 65A of the Banking Act]

Insurance Act

2.15 The changes to the injunctions provisions in the Insurance Act are made by repealing the existing provision in its entirety and substituting a new section 129D. The new section enables restraining and performance injunctions to be sought by APRA where there has been a contravention of the Act, the regulations or the prudential standards, a condition imposed under the Act, or a direction by APRA under the Act. In addition, injunctions can be sought to prevent attempts, acts such as aiding, inducing, or being knowingly concerned in a contravention. The new section also empowers the Federal Court to award damages in addition to ordering an injunction. [Item 7, Part 2 of Schedule 2 of the Bill, section 129D of the Insurance Act]

Life Insurance Act

2.16 The Bill amends the Life Insurance Act by repealing the existing injunctions provision and inserting the new, harmonised provision. The new section 235 provided for by the Bill will enable the Federal Court to grant injunctions on terms and in circumstances similar to the new regimes introduced for the Banking and Insurance Acts. APRA or ASIC may apply to the Court for an injunction under the new section. [Item 8, Part 3 of Schedule 2 of the Bill, section 235 of the Life Insurance Act]

SIS Act

2.17 Minimal changes are made to the SIS Act, reflecting the fact that the existing injunctions provisions in that Act are taken by the Bill as the model for harmonisation of these provisions throughout the prudential regime. The Bill does however, extend the circumstances in which an injunction can be sought to include contraventions or failure to fulfil requirements in respect of a condition imposed on a Registrable Superannuation Entity (RSE) licence or a direction given under the Act by APRA or the Regulator. The Bill also clarifies that the Federal Court's powers under this provision are in addition to and do not limit its other powers. [Items 9, 10 and 12, Part 4 of Schedule 2 of the Bill, section 315 of the SIS Act]

2.18 An amendment to subsection 315(6) enables the Court to discharge or vary an injunction granted under section 315. [Item 11, Part 4 of Schedule 2 of the Bill, section 315 of the SIS Act]

First Home Saver Accounts Act

2.19 The injunctions provisions of the SIS Act are expressly applied to authorised First Home Saver Account providers under the First Home Saver Accounts Act. The Bill makes an adjustment to that Act that has the effect of ensuring that injunctions can be applied for in respect of breaches of or failures to comply with conditions imposed on authorised FHSA providers that are trustees under the First Home Saver Accounts Act. [Item 13, Part 5 of Schedule 2 of the Bill, section 120A of the First Home Saver Accounts Act]

Application

2.20 The amendments made by Schedule 2 of the Bill apply to applications in relation to an injunction made on or after the commencement of this Schedule. The conduct giving rise to the application for an injunction may have occurred before the commencement of this Schedule. [Item 14 of Schedule 2 of the Bill]