Senate

Explanatory Memorandum

(Circulated by authority of the Minister for Financial Services and Regulation, the Honourable Joe Hockey, MP)

Outline and financial impact

Outline

1.1 This Bill transfers the administration of the Financial Corporations Act 1974 from the Reserve Bank of Australia (RBA) to the Australian Prudential Regulation Authority (APRA).

1.2 When APRA was established on 1 July 1998, it inherited a variety of data collection tools and analysis systems. These tools and systems were tailored to meet the data needs of APRAs predecessor organisations (Insurance and Superannuation Commission, RBA, State Supervisory systems and Australian Financial Institution Commission).

1.3 This Bill aims to modernise and increase the relevance of data collections, thereby ensuring that APRA collects the data it requires for the purposes of its prudential functions. The data APRA collects will also continue to facilitate the formulation of monetary policy by the RBA. Secondly, it aims to harmonise and increase the flexibility of the data collections and publishing regimes, and finally, to have a central repository for the collection of financial data. Overall, the proposed regulatory measures are designed to streamline and simplify the current data collection methods and systems.

1.4 The Bill covers the following broad areas:

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entities covered by the Bill;

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the registration of corporations and the obligations on those corporations;

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the power for APRA to determine reporting standards that will require compliance with the standards through the provision of reporting documents by financial sector entities; and

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the application of the Commonwealths criminal code to certain offences in this Bill.

Financial impact statement

1.5 It is not envisaged that the Bill will have a financial impact on the operations of government. The Australian Prudential Regulation Authority is self-funded through financial sector levies.

Abbreviations

The following abbreviations are used in this explanatory memorandum.

Regulation Impact Statement

Problem identification

3.1 The Australian Prudential Regulation Authority (APRA) was established on 1 July 1998 as the single integrated, prudential regulator of banks, insurance companies, building societies, credit unions, friendly societies and superannuation funds. APRAs primary role is to protect the interests of depositors, insurance policy holders and superannuation fund members. It does this through a variety of methods including through licensing institutions and implementing risk management requirements.

3.2 To understand the condition of financial institutions and to monitor their compliance with prudential requirements, APRA gathers detailed financial data from the entities it supervises through financial reporting requirements. This data is more frequent, and in some respects more detailed, than general purpose reporting (eg. accounting standards) and continuous disclosure (eg. Corporations Law) which are aimed mainly at listed companies to inform the marketplace. The collection of APRAs financial reporting data also enables general research and analysis to be undertaken into the trends and pressures affecting the financial sector and the publication of relevant information.

3.3 On establishment, APRA inherited a variety of data collection tools and analysis systems. These tools and systems were tailored to meet the data needs of APRAs predecessor organisations. Three problems have been identified with this inherited data collection framework.

3.4 First, the existing data collection framework is fragmented, cumbersome and in some areas outdated. APRA collects 153 forms, comprising 17,000 data items. In some cases the data collected is inadequate or no longer relevant to the performance of APRAs functions. For example, the current tools do not permit APRA to collect data about conglomerate groups and industry sub-sectors. In addition, in this information age the current collection framework provides no incentives for institutions to provide data in a timely manner.

3.5 The second problem concerns the inflexibility and inconsistency of the current data collection and publishing powers. APRAs current data collection works in conjunction with its data publishing powers and both are contained in a variety of industry-specific legislation and regulation including: the Banking Act 1959, Insurance Act 1973, Life Insurance Act 1995, Superannuation Industry (Supervision) Act 1993, Retirement Savings Account Act 1997 and the Australian Prudential Regulation Authority Act 1998. Changes to APRAs data collection and publishing powers can only be made by changes to such legislation and associated regulations. This is a lengthy process and has meant that APRAs data collection and publishing tools have failed to keep pace with rapid industry development and the demand for current financial sector information. This situation is inconsistent with APRAs aims to streamline and harmonise supervisory and information requirements across APRA supervised institutions.

3.6 Finally, the current situation means that there is a significant overlap in reporting duties imposed on entities to provide similar data to different government agencies such as APRA, the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).

3.7 The ABS also collects an array of data from financial institutions under the Census and Statistics Act 1905, some of these data items are the same or similar to the data needed to be collected by APRA. There is an opportunity for coordination and rationalisation.

Objectives

3.8 The proposed regulatory measures are designed to streamline and harmonise information requirements across APRA supervised institutions, and to modernise and increase the relevance of financial data, cost effectively.

Identification of options

Option 1 - Amendments to current financial sector data collection powers

3.9 A modernised and harmonised set of financial sector data-collection powers could be inserted into a new Act based on the Financial Corporations Act 1974. Under this option, the responsibility for collecting information required by the RBA for monetary policy and related purposes under the Financial Corporations Act would be transferred to APRA under the new Act. Similarly, consequential amendments would need to be made to the Banking Act 1959, Insurance Act 1973, Life Insurance Act 1995, Superannuation Industry (Supervision) Act 1993 and Retirement Savings Account Act 1997 and regulations to repeal the current data collection powers. Under the revamped Financial Corporations Act 1974, APRA would retain the current power to impose financial penalties on institutions that fail to provide data in a timely manner. In addition, it will have power to publish data received from institutions, except for data flagged as commercial-in-confidence or public interest-in-confidence by APRA after consultation with industry. The data collected under this Act will be able to be passed to the RBA and ABS for the purposes of their own monetary policy and statistical requirements, respectively.

Option 2 - No specific action

3.10 Under this option, no measures would be introduced, and APRA regulated financial institutions would continue to provide data according to the financial reporting requirements under the current legislation.

Impact analysis

Impact group identification

3.11 The main groups likely to be affected by the proposed amendments are: financial institutions regulated by APRA, financial institutions regulated under the Financial Corporations Act 1974 (eg. merchant banks and finance companies), APRA, the RBA, the ABS and users of financial services.

Assessment of costs and benefits

Option 1 - Proceed with legislative amendments

3.12 The proposed amendments will benefit all of the parties identified as being affected by the proposed changes.

Financial Institutions

3.13 Financial institutions will benefit from a more streamlined collection process.

3.14 Under the proposed legislation, improved data submission mechanisms (for example, secure website submission in addition to the current disk and email submission - which can be easily corrupted and are time-consuming, particularly for download of many data sets - improved system speed and a data integrity process) and a reduction in the frequency of certain key collections will contribute to a decrease in the amount of data required to be provided in total to APRA, the RBA and ABS, leading to a reduction in the compliance costs and time required to fulfil data providing duties. Financial institutions will not have to spend valuable time providing similar data to RBA, ABS and APRA; instead, APRA will be the central data collection repository.

3.15 Under the proposed legislation, modernised and harmonised collections amongst APRA, RBA and ABS will contribute to easier compliance with APRAs requests for data, as these will be more commercially aligned. Harmonising each of the data collections that APRA is responsible for with the public disclosure requirements of provider institutions and with the financial collections of the ABS and RBA will make it simpler for institutions to comply.

3.16 Implementation of a well understood annual change cycle. As data requirements are generally stable for several years at a time, with only minor additions needed over the short term, it is proposed that a rolling review of all data items be undertaken. This would entail a complete reassessment of data requirements by APRA, RBA and ABS and a rationalisation of data collection using, wherever possible, the same conceptual framework. This process (involving industry consultation and reasonable lead times) will enable institutions to comply with APRAs request for data in a measured and timely manner and add certainty as to what data is required.

3.17 The ability to examine industry data collected by APRA and selectively use this data as a basis for comparison with other institutions or sectors of the financial system (peer groups) will benefit the industry directly and analysts more broadly by facilitating greater market transparency leading to better informed commercial decisions.

3.18 The costs associated with the proposed amendments are not easily measurable. Financial institutions will initially face some transitional costs as a result of having to provide data to APRA in a different form. However, given that one of the aims of the amendments is to closely mirror the way APRA collects data with the way that financial institutions report their business activities, these costs should be modest. Further, the disciplined review cycle means future data changes will follow a predictable process with adequate industry consultation and lead times. In the long term, the benefit in cost savings to financial institutions will be substantially greater than the initial costs incurred.

APRA

3.19 APRA will benefit from the proposal through an increased ability to collect data required to effectively perform its supervisory functions. For example:

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a single reporting and analysis platform across industries;

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new risk rating and improved exception reporting arrangements;

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more efficient and effective offsite analysis tools for APRA front line supervisors;

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better collection and analysis of data across conglomerate groups and industry sub-sectors; and

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where APRA has specific concerns about a financial institution, APRA will be able to more effectively gather information from that institution in a more timely manner.

3.20 In addition, the proposed amendments will provide industry with an incentive to comply with APRAs request for data. It also encourages prudent practice amongst institutions by ensuring that they examine their activities in a similar manner to that of the supervisor. The proposed amendments will also facilitate the continued development of a cooperative relationship between APRA and industry.

3.21 The costs to APRA in the development and deployment of integrated data systems together with the associated staff training necessary to allow efficient analysis of the different industry data sets are substantial. The Statistics Project is utilising a range of internet based secure communications technologies, together with high end Oracle data warehouse and business intelligence tools. Consulting costs associated with the project are substantial. The analysis functionality available to APRA analysts will be substantially in advance of anything previously available to prudential supervisors. However, the technology investment provides a long-term solution to a problem involving substantially out of date, disparate, data collection and analytical systems. It is important to realise that the systems being replaced are reaching the end of their useful life and, although the costs of the Statistics Project are substantial, the difference between these costs and the costs of maintaining and eventually updating the existing systems is marginal. The long term benefits, including better access to data and more efficient regulation, leading to better prudential oversight of the financial industry, will far outweigh the initial investment. Furthermore, unquantifiable but real benefits will accrue to the users of financial services through greater confidence in financial services, greater safety for investors and a stronger financial sector.

ABS and RBA

3.22 The amendments will benefit the RBA and ABS through:

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more efficient and rationalised data collection methods; resulting in

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reduced staff and systems costs that are duplicating processes already undertaken by APRA; and

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allowing resources to be concentrated on improved analysis activities.

3.23 The costs associated with the proposed amendments to the ABS and RBA will be negligible. APRA is currently negotiating a user-pays agreement for the provision of data to the ABS and RBA. While final costs to these agencies is yet to be agreed it should build in the savings realised by rationalising the data collection system.

3.24 Financial institutions will continue to be included in ABS collections where the subject matter, or the detail, is not required by, or of interest to, APRA or RBA for their purposes.

Option 2 - No specific action

3.25 The benefit will be short term savings, through avoiding initial outlays to improve systems and staff training, but there will be no long term benefit and it is estimated there will be the following long term costs:

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for APRA, an ageing set of systems and forms which will become increasingly difficult to maintain and increasingly outmoded in content;

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a continued burden on financial institutions to provide similar data to different government bodies; and

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a continued duplication of government processes and resources.

3.26 Also, in the absence of reform to streamline APRA's data collection powers, to obtain the relevant information APRA will need to rely on more indirect methods such as licensing, capital, audits and inspections. Tasking frontline supervisors to put a disproportionate store on these other prudential techniques is staff resource intense and could diminish APRAs standing and credibility within the regulatory community and the financial marketplace.

Consultation

3.27 Consultation on the content of the Financial Sector (Collection of Data) Bill 2001 and Financial Sector (Collection of Data - Consequential and Transitional Provisions) Bill 2001 involved representative bodies including the Australian Bankers Association, International Banks and Securities Association of Australia, Credit Union Services Corporation (Australia) Limited, National Credit Union Association Inc., Australian Association of Permanent Building Societies, Australian Friendly Societies Association, Australian Superannuation Funds Association, Australian Institute of Superannuation Trustees, Insurance Council of Australia, Australian Equipment Lessors Association Inc, Investment & Financial Services Association Limited and the Industry Funds Forum.

3.28 Consultations were largely positive, particularly in the banking sector, although a few refinements to the legislation were suggested by the superannuation sector partly reflecting factors specific to this sector. These suggestions have been taken into account through the Government amendments to the legislation.

3.29 Similarly, the Australian Securities and Investments Commission, the Australian Taxation Office, RBA and ABS are supportive of the proposed amendments. The RBA and ABS fully support that APRA should be the central collection point for most financial data from the finance sector.

Conclusion and recommended option

3.30 Option 1 will modernise and increase the relevance of data collections by developing a flexible framework to accommodate financial sector data collection and provide an opportunity to review the current data collections, some of which is historical data collection and serves no real prudential purpose now. Streamlining and harmonising industry Acts into a single data collection Act and the use of reporting standards will ensure the flexibility of data collection and publication to keep pace with financial sector innovation and developments.

3.31 Given substantial benefits will be provided to all parties affected by the proposed amendments, and that the long term costs to all of the parties will be minimal, Option 1 is the preferred option. The proposed amendments are necessary to remedy the current deficiencies in the data collection system.

Implementation and review

3.32 It is proposed that the Financial Corporations Act 1974 be amended so that APRA will act as a single Government collection agency for the financial sector. It is also proposed that this Act be renamed the Financial Sector (Collection of Data) Act 2001. The Financial Sector (Collection of Data - Consequential and Transitional Provisions) Bill will consequentially amend all of APRAs industry supervision Acts to remove data collection provisions. All current data collection powers in the industry specific legislation will be transferred and harmonised into this new Act.

3.33 It is proposed that a rolling review of all data items be undertaken entailing a complete reassessment of data requirements by APRA, RBA and ABS and a rationalisation of data collection and to use, wherever possible, the same conceptual framework.

3.34 In addition, the detailed regulatory standards will be introduced progressively over the next two to three years, beginning with the authorised deposit-taking institution (ADI) sector on a date to be fixed by Proclamation. APRA will continue to hold in depth consultations with industry groups on the regulatory standards before they are introduced.

Proposed legislation

Part 1 - Preliminary

Clause 1 Short title

4.1 Upon enactment, the Bill will be known as the Financial Sector (Collection of Data) Act 2001.

Clause 2 Commencement

4.2 This clause provides for commencement of the Bill (other than Parts 2, 3 and 4) on the day on which the Bill receives the Royal Assent.

4.3 Parts 2, 3 and 4 which relate to the registration of companies, the provision of documents and miscellaneous provisions, commence on a day to be fixed by Proclamation.

4.4 This clause ensures that Parts 2, 3 and 4 commence no later than 12 months after the Act receives Royal Assent.

Clause 3 Object of Act

4.5 The object is self-explanatory. It enables APRA to collect data to assist it in its role as Australias prudential regulator as well as facilitating the formulation of monetary policy by the RBA.

Clause 4 Extension to external Territories

4.6 This extension of the Bill to external Territories is designed to ensure that the provisions of this Bill extends to all Territories.

Clause 5 Entities covered by the Act

4.7 This clause defines financial sector entities. For the purposes of this Bill, financial sector entities are either registered or regulated entities. A registered entity is a corporation whose name is entered in the Register of Entities kept by APRA under clause 8 of this Bill. A regulated entity is any of: a body regulated by APRA (within the meaning of subsection 3(2) of the Australian Prudential Regulation Authority Act 1998; a supervised body corporate within the meaning of section 49A of the Insurance Act 1973; a subsidiary of an ADI, or of an authorised NOHC, within the meaning of the Banking Act 1959).

Clause 6 Application of Criminal Code

4.8 Chapter 2 of the Criminal Code will be applied to this Bill.

Part 2 - Registration of corporations

Clause 7 Registrable corporations

4.9 Registrable corporations are defined in this clause.

Clause 8 Register of entities

4.10 APRA must keep a Register of Entities for the purposes of this Bill which is available for inspection by the public at an APRA office during business hours. The contents of the Register are public and a person is able to inspect the register and make a copy of, or make an extract from, the Register subject to a fee (if any) prescribed by regulation.

Clause 9 Obligations of corporations

4.11 Subclause (1) requires a registrable corporation to which this Part applies on commencement, to furnish to APRA, within 60 days after the commencement of this Part, certain documents mentioned in subclause (5).

4.12 This clause also makes it an offence if an entity fails to meet this requirement. The offence carries a penalty of 50 penalty units. A penalty of 50 penalty units is applied for each day the documents are not furnished. The subclause also inserts a note after the subclause drawing attention to the continuing obligation on an entity under section 4K of the Crimes Act 1914 to provide the documents to APRA.

4.13 Subclause (2) imposes a similar requirement as under subclause (1) to provide documents to APRA but applies to corporations who become a registrable corporation after the commencement of this Part. This clause also makes it an offence to fail to provide such documents as required with a penalty of 50 penalty units. A penalty of 50 penalty units is applied for each day the documents are not furnished. The subclause also inserts a note after the subclause drawing attention to the continuing obligation on an entity under section 4K of the Crimes Act 1914 to provide the documents to APRA.

4.14 Subclause (3) provides that before the expiration of the 60 day limit, APRA may grant a corporation an extension of time in which to furnish the documents.

4.15 Subclause (4) states that a corporation need not furnish the documents, if within the 60 days or such other period as APRA has permitted, the Bill ceases to apply to the corporation. This subclause also inserts a note drawing attention to the legal burden on a defendant in relation to the matters in the subclause.

4.16 Subclause (5) outlines the documents that need to be furnished to APRA under subclauses (1) and (2).

4.17 Subclause (6) provides that a registered corporation is to inform APRA, in writing, of any change in the information contained in the documents furnished to APRA. Failure by a registered corporation to provide such information as required is an offence, subject to a penalty of 10 penalty units. A penalty of 10 penalty units is applied for each day the documents are not furnished. This subclause also inserts a note after the subclause drawing attention to the continuing obligation on an entity under section 4K of the Crimes Act 1914 to provide the documents to APRA.

4.18 Subclause (7) provides that a corporation is not required to furnish any information already provided by a related corporation. This subclause also inserts a note drawing attention to the legal burden on a defendant in relation to the matters in the subclause.

4.19 Subclause (8) requires that a statement or notification by a corporation to APRA must be signed by a senior officer of the corporation.

4.20 Subclause (9) provides for APRA to furnish documents provided under this clause to the Secretary of the Department of Treasury upon request.

4.21 Subclause (10) makes an offence against subclauses (1), (2) or (6) an offence of strict liability.

Clause 10 Matters to be included in Register of Entities

4.22 APRA is to keep a Register of the entities that have furnished the required documents and is to alter the register in accordance with information subsequently provided by the corporation.

4.23 APRA is not required to remove the name of a corporation from the Register unless the corporation is no longer subject to this legislation.

4.24 This provision is based on subsection 9(c) of the Financial Corporations Act 1974. Currently no personal information is collected from entities under this provision and there is no intention to undertake collection of personal information.

Clause 11 List of names and categories of registered entities

4.25 Subclause (1) provides that APRA must keep a list of the names of registered entities, divided into categories as APRA determines. Historically, registered entities were divided into categories to assist in the formulation of information for monetary aggregate purposes. Since then, these categories have been used by other pieces of legislation as a basis for exempting or including entities within categories from particular requirements.

4.26 Subclause (2) provides that APRA may vary the list to keep it up to date, including assessing the appropriate category for a corporation.

4.27 APRA is required to publish the list, variations of the list or any replacement of the list in the Gazette (subclauses (4) and (5)). APRA may vary the list to keep it up to date (subclause (5)). A corporation can also ask APRA to review its categorisation on the basis of new information and APRA is required to undertake such a review, when requested (subclause (7)).

Part 3 - Provision of Documents to APRA

Division 1 - Deferred application of this Part in relation to registered entities

Clause 12 - Application

4.28 This clause notes that Part 3 does not apply to registered entities until Part 2 commences. It is the intention that registered entities will continue to comply with their requirements under the Financial Corporations Act 1974 until APRA has the systems in place to transfer the data collection and associated responsibilities from the RBA. When the systems are in place, Part 2 (and therefore Part 3) will commence.

Division 2 - Determination of reporting standards and requirement to provide documents

Clause 13 - APRA may determine reporting standards for, and require provision of, certain documents

4.29 This provision enables APRA to specify, in writing, reporting standards to be complied with by financial sector entities registered under this Bill with financial documents relating to the business or activities of entities outlined in subclauses 13(1)(a)(i) and (ii). APRA can publish these reporting standards in any way it considers appropriate to maintain flexibility in dealing with financial sector developments.

4.30 Subclause (1) also inserts a note dealing with APRAs power to revoke or vary a standard. Under subclause (1)(a), the fact that the power to determine the standard has to be exercised in writing will attract the operation of subsection 33(3) of the Acts Interpretation Act 1901.

4.31 Subclause (2) outlines matters to be included in the reporting standards and may include matters such as the form and lodgement period for particular information. This subclause provides APRA with the flexibility to keep reporting standards up to date and efficient. It should be noted that there is no intention to facilitate the collection of personal information in excess of the personal information that APRA is currently empowered to collect.

4.32 Under subclause (3), the reporting standards may apply to all financial sector entities, or a specified class of financial sector entities, or place different requirements to be complied with in different situations for different businesses or activities.

4.33 Subclause (4) notes that the reporting standards can require information from a regulated entity on its consolidated accounts which exclude some entities. For example, if a bank has 100 per cent ownership of an insurer, APRA may want to seek consolidated accounts from the bank which reflect the position of the bank and its subsidiaries excluding the insurer.

4.34 Subclause (5)(a) provides that when APRA prepares reporting standards, it must consult financial sector entities and/or other relevant bodies such that would be affected by the standards set by APRA. Such relevant bodies would include associations, representative bodies or a class or classes of financial sector entities.

4.35 Subclause (5)(b) ensures that APRA must try to minimise the compliance burden on financial sector entities resulting from the requirements of the standards.

4.36 Subclause (6) does not require APRA to consult under subclause (5)(a), if it is satisfied that any delay would result in an unacceptable risk to depositors, policy holders or members of the financial sector entities concerned. It is intended this clause will only be used on prudential safety grounds.

4.37 Subclause (7) states that the validity of a reporting standard is not affected if APRA fails to consult as required under subclause (5)(a).

4.38 Subclause (8) provides that instruments issued under paragraph (1)(a) will be disallowable instruments.

4.39 Failure by an entity to provide a reporting document to APRA by the required time is a criminal offence (subclauses (9) - (11)).

Clause 14 - Principal executive officer of financial sector entity (other than a superannuation entity) to notify the entitys governing body of a failure to provide reporting documents to APRA

4.40 The application of this clause on superannuation entities, applies the concept of a principal executive officer which could potentially be confusing for, and difficult to identify, for superannuation entities. In some industry funds and large public offer funds, a principal executive officer will be clearly identified. In other superannuation funds, there can also be a group of trustees or trustee directors making decisions collectively and contracting out other functions to service providers, custodians, fund managers etc. In this situation, identifying a principal executive officer is difficult and potentially confusing in contrast to an ordinary corporation. Trustees of superannuation funds will remain solely responsible for lodging annual returns and other documents with APRA.

4.41 This clause attempts to ensure that the governing body of an entity is made aware as soon as possible that documents have not been given to APRA as required. This is important from a prudential perspective in that it can provide an avenue for early identification by the regulator of potential problems or oversights.

4.42 Subclause (1) applies when a financial sector entity (other than a superannuation entity) fails to comply with a requirement to provide APRA with a reporting document as required by, or under, a reporting standard before a particular time or within a particular period. In the case of superannuation entities, trustees of superannuation funds will remain solely responsible for lodging annual returns and other documents with APRA.

4.43 Subclause (2) states that it is the duty of the principal executive officer of the entity to notify the governing body of the entity in writing that the failure has occurred. This must happen as soon as practicable either after that time or the end of that period.

4.44 Subclause (3) makes it an offence for the principal executive officer of a financial sector entity to refuse or fail to notify the governing body or entity as required by subclause (2). The penalty for such an offence is 50 penalty units.

4.45 Subclause (4) makes an offence for a contravention of subclause (3) an offence of strict liability.

Clause 15 - When reporting standards begin to apply to particular financial sector entities

4.46 Reporting standards begin to apply on and after the day declared by APRA. The standards can apply to a single entity or to the class or kind of financial sector entities on which the entity is included. Declarations under this clause must be made by APRA in writing and be published in the Gazette.

4.47 For example, in the case of a single entity such as an ADI, if it was in financial difficulty, APRA will have the power to require more frequent reporting (rather than quarterly) for that particular entity. APRA will also be able to reissue the Reporting Standard (via, say, a letter direct to the entity with accompanying standard) to the financial sector entity with the variation in requirement.

Clause 16 - Exemptions

4.48 This clause provides that APRA may exempt, by writing, a financial sector entity, or a class or kind of financial sector entities, from the need to comply with a requirement(s) in a reporting standard outlined in clause 13. The exemption may be subject to conditions.

4.49 As outlined above in relation to clause 13, the reporting standards are disallowable instruments. A further safeguard for entities is the requirement in subclause 13(5) that APRA must try to minimise, as far as practicable, the burden on financial sector entities in complying with the standards. The exemption power in clause 16 provides an additional means whereby a financial sector entity can raise any particular concerns about compliance with the standards.

4.50 This clause has also been included as the prudential data APRA receives from regulated entities is only relevant if it is accurate and enables identification of weaknesses or potential areas of risk within an entity. On the other hand, there may be some data collection requirements that are necessary for more sophisticated entities that are not appropriate for smaller entities. This power will enable APRA to tailor data collection as necessary in order to fulfil its prudential supervision function adequately.

Clause 17 - APRA may require the variation of a reporting document or the provision of financial information

4.51 This clause details options available to APRA if it considers that the reporting document provided to APRA by a financial sector entity are either incorrect, incomplete or misleading; or do not comply with a reporting standard that applies to it; or do not contain information, or adequate information, about a matter. This will ensure the integrity of information provided to APRA since accurate prudential information is necessary to enable early identification of potential areas of prudential risk within an entity.

4.52 APRA can give the entity written notice requesting it to provide APRA, in writing, an explanation or the provision of information as is specified in the notice. Time periods and compliance periods are noted in subclause (2).

4.53 Subclauses (3) and (4) provide APRA with the power to give written directions for the variation of the document to rectify the matters outstanding and the giving of adequate information. Time periods and compliance periods for the directions are noted in subclause (5).

4.54 Failure to comply with a direction is a criminal offence (subclauses (8)-(10)). However, subclauses (6) and (7) enable APRA, of/on its own motion, or at the request of the financial entity to revoke or vary the direction.

Division 3 - Administrative penalties in lieu of prosecution for certain offences

Clause 18 - Application of Division

4.55 This Division applies to an offence for a contravention of subsection 9(1), (2) or (6), subsection 13(9), subsection 14(3) or subsection 17(8).

Clause 19 - When an infringement notice can be served

4.56 This provision sets out when APRA can serve an infringement notice on a person where it has reasonable grounds to believe that a financial sector entity has committed an offence(s).

4.57 Generally, an infringement notice can only relate to a single offence, unless the offences include refusing or failing to comply with a requirement with a specified time or within a specified period, and the offences are one or more daily offences constituted by refusing or failing to comply with the requirement after that time or period. A further exception will occur where the offences are two or more daily offences constituted by refusing or failing to comply with requirement, by or within the timeframe specified by the requirement.

4.58 This item also inserts a note after subsection 19(2)(b) drawing attention to section 4K of the Crimes Act 1914 relating to provisions for daily offences.

4.59 For an infringement notice served by APRA to have any effect, it must be served within one year after the day on which the offence, or the earlier or earliest of the offences, is alleged to have been committed.

Clause 20 - Matters to be included in an infringement notice

4.60 This clause outlines matters that APRA must include in an infringement notice, such as details of the alleged offences, penalties in relation to those offences and relevant time periods, amongst other matters. APRA has the power to extend periods stated in notices in relation to paragraph 1(e) of this clause (see clause 25 of this Bill). The maximum amount of the fine or fines that a court could impose for an offence or offences under subclause 13(9) of this Bill is determined, in the case of a body corporate, by reference to subsection 4B(3) of the Crimes Act 1914.

Clause 21 - Withdrawal of infringement notice

4.61 This clause provides flexibility where an infringement notice has been served on a person, and then after written representation to APRA, a notice is withdrawn. APRA can withdraw such a notice (whether sought by the person or not) by serving on the person a written notice of the withdrawal within the time period the penalty specified in the infringement notice is required to be paid.

4.62 If the notice is not withdrawn, the person can still refuse to pay, at the risk of being prosecuted. However, if the notice is withdrawn, the person may still be prosecuted (see subparagraph 24(b)(ii)).

4.63 Subclause (3) states the matters APRA may have regard to in deciding whether or not to withdraw an infringement notice. APRA may consider matters such as whether the person has previously been convicted of an offence for a contravention of this Bill, the circumstances in which the offence(s) specified in the notice are alleged to have been committed, whether the person has previously been served with an infringement notice in respect of which the person paid the penalty specified in the notice, and any written representations made by the person.

4.64 Subclause (4) specifies that where an infringement notice is withdrawn, APRA must refund to the person, an amount equal to the amount paid. For a refund to occur, a person must have already paid the penalty specified in the infringement notice and the notice is withdrawn after the person pays the penalty.

Clause 22 - What happens if penalty is paid

4.65 When a penalty is paid for offences for contravention of any of the subsections listed in clause 17, it discharges any liability for the person for the offence or offences specified in the notice, and for any other offences or offences constituted by the same omission. Further proceedings cannot be taken against the person for the offence or offences specified in the notice and proceedings cannot be taken against the person for any other offences or offences constituted by the same omission. Furthermore, the person is considered as having not been convicted of the offence or offences in the notice. Subclauses 22(2) and (3) will not prevent the person who pays the penalty specified in an infringement notice from being given another infringement notice in respect of, or from being prosecuted for, any further delay in performing the obligation to which the notice relates which occurs after the period of delay covered by the notice.

4.66 This section only applies if the infringement notice served on the person is accurate in that it relates to the act the failure to do which constituted the offence and pays the penalty specified in the notice before the end of the period referred to in 20(1)(e) and the infringement notice is not withdrawn.

Clause 23 - More than one infringement notice may not be served for the same offence

4.67 This clause does not permit APRA serving more than one infringement notice on a person for the same offence or offences.

Clause 24 - Infringement notice not required to be served

4.68 This clause states that this Division does not require an infringement notice to be served on a person in relation to an offence, or affect the liability of such a person to be prosecuted for an offence if: an infringement notice served on the person in relation to the offence or any other offence constituted by the same omission or whether such an infringement notice has been withdrawn. Nor does this Division affect the liability of a person to be prosecuted for an offence if it does not comply with an infringement notice served on it in relation to the offence or any other offence constituted by the same omission. Finally, this Division does not limit the size of the penalty that may be imposed on a person convicted of an offence.

Clause 25 - APRA may extend period for payment of penalty

4.69 This clause provides APRA with the power to extend the period referred to in subclause 20(1)(e) for a person to pay a penalty. APRA must exercise this power in writing.

4.70 Subclause (2) provides that APRA may exercise this power before or after the end of the period.

4.71 If APRA extends a period for the payment of a penalty, a reference to this Division, or in a notice or other instrument under this Division, to the period, is taken in relation to the person, to be a reference to the period as so extended.

Part 4 - Miscellaneous

Clause 26 - Saving of other laws

4.72 Other Australian laws, including any Commonwealth, State and Territory laws will continue in force except to the extent that they are in conflict with this Bill.

Clause 27 - Entities may be directed to comply with Act

4.73 Where a financial sector entity is convicted of an offence against this Bill for failing to comply with a provision, the Federal Court may, upon the application by APRA, direct compliance by the financial sector entity within a specified time.

Clause 28 - Validity of acts and transactions of financial sector entities

4.74 Failure to meet the provisions of this Bill should not affect the validity of a transaction entered into by the financial sector entity.

Clause 29 - Corporations not to hold out that it is a registered entity

4.75 To preclude a corporation from using words that imply that registration under this legislation confers any special status on it or guarantees its financial soundness or stability, corporations are prohibited in the course of their business from advertising or holding out that they are, registered under the Financial Sector (Collection of Data) Act 2001 or registered with APRA or words having similar meaning.

4.76 An offence under this provision carries a maximum penalty of 50 penalty units.

Clause 30 - Regulations

4.77 A standard provision for regulations to be made under this Bill is included.