Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 (105 of 2008)

Schedule 1 Financial Claims Scheme

Part 1 Amendment of the Banking Act 1959

15 After Division 2 of Part II

Insert:

Division 2AA - Financial claims scheme for account-holders with insolvent ADIs

Subdivision A - Preliminary

16AB Purpose of this Division

The main purpose of this Division is to provide for a scheme that:

(a) allows the Minister to make a declaration about an ADI that APRA has sought to have wound up for insolvency; and

(b) entitles account-holders who have certain protected accounts with a declared ADI to be paid certain amounts to maintain the account-holders’ liquidity before they would receive payment in a winding up of the ADI; and

16AC APRA’s functions relating to this Division

APRA’s functions include:

(a) meeting entitlements under Subdivision C; and

(b) preparing, and assisting the Minister to prepare, for the application of that Subdivision in relation to ADIs; and

Subdivision B - Declaration of ADI

16AD Declaration that Subdivision C applies in relation to ADI

(1) The Minister may declare that Subdivision C applies in relation to a specified ADI if APRA has applied under section 14F for the ADI to be wound up.

Note: The Minister cannot make a declaration relating to a foreign ADI because APRA cannot apply for a foreign ADI to be wound up: see section 11E.

Declaration to specify amount for meeting entitlements

(2) The declaration must also specify the amount (if any) that is to be credited to the Financial Claims Scheme Special Account in connection with the application of Subdivision C in relation to the declared ADI. If APRA’s application under section 14F was made on or after 12 October 2011, the amount must not be more than $20,000,000,000.

Declaration to specify amount for administration

(3) The declaration must also specify the amount (if any) that is to be credited to the APRA Special Account in connection with the administration of this Division in relation to the declared ADI. The amount must not be more than $100,000,000.

Amendment of specification of amounts

(4) The Minister may amend a declaration made under subsection (1), but only to change the specification of an amount under subsection (2) or (3), within the limit set in that subsection.

Declaration cannot be revoked

(5) The Minister cannot revoke a declaration made under subsection (1).

Declaration or amendment not disallowable or subject to expiry

(6) A declaration made under subsection (1), or an amendment of the declaration, is a legislative instrument, but neither section 42 (disallowance) nor Part 6 (sunsetting) of the Legislative Instruments Act 2003 applies to the declaration or amendment.

Effect of declaration or amendment

(7) The declaration or amendment:

(a) takes effect from the time it is made, despite subsections 12(1) and (2) of the Legislative Instruments Act 2003; and

(b) has effect according to its terms.

Declaration not to specify ADI by reference to class

(8) Subsection 13(3) of the Legislative Instruments Act 2003 does not apply to a declaration under subsection (1) specifying an ADI.

Note: This ensures that a declaration must specify an ADI individually, and cannot specify it by reference to a class of ADIs.

16AE Advice and information for decision on making declaration

(1) The Minister may give APRA, ASIC or the Reserve Bank a written request for advice or information about a matter relevant to making a decision about making a declaration under section 16AD (including a matter relating to the affairs of an ADI).

(2) As soon as reasonably practicable after being given the request, APRA, ASIC or the Reserve Bank must give the Minister the advice or information about the matter.

(3) In making the decision, the Minister must take into account the advice and information (if any) that he or she has been given before making the decision. This does not limit what the Minister may take into account in making the decision.

Subdivision C - Payment of account-holders with declared ADI

16AF Payment of account-holders with declared ADI

(1) An account-holder who has a protected account with a net credit balance with a declared ADI at the declaration time is entitled to be paid by APRA an amount equal to the sum of:

(a) that balance; and

(b) the interest (if any) accrued by, but not credited to, the account-holder in connection with the protected account before the declaration time;

increased or decreased in accordance with the regulations to take account of clearance, within the period prescribed by the regulations, of transactions connected with the protected account and entered into before the declaration time.

Joint protected accounts

(2) If the account mentioned in subsection (1) is held jointly by 2 or more account-holders with the declared ADI, that subsection entitles each of the account-holders to an equal share of the amount to which one of those account-holders would be entitled if it alone had the account with the declared ADI.

16AG Limit on payments to account-holder with declared ADI

(1) Despite section 16AF, an account-holder is not entitled under that section to be paid, in connection with the protected account or protected accounts the account-holder has with a particular declared ADI at a particular time, one or more amounts totalling more than the limit prescribed by, or worked out under, the regulations.

(2) The regulations may prescribe, or provide for working out, different limits for the purposes of subsection (1) relating to account-holders in different classes.

(3) Despite section 16AF, if:

(a) the account-holder has 2 or more protected accounts with the declared ADI at that time; and

(b) subsection (1) of this section reduces the total amount to which the account-holder would otherwise be entitled under section 16AF in connection with those protected accounts;

APRA may determine in writing, for each of the protected accounts, the amount (if any) of the entitlement under that section connected with the protected account (so that the total of the entitlements equals the limit prescribed by, or worked out under, the regulations for the purposes of subsection (1) of this section).

Note: Amounts may be determined by reference to a class, or more than one class, of accounts: see subsection 46(3) of the Acts Interpretation Act 1901.

(4) In making the determination, the desirability of the account-holder receiving its entitlements as early as possible is to be taken into account. This does not limit the matters that may be taken into account in making a determination.

16AH Payment

Various ways of meeting entitlement

(1) An account-holder’s entitlement under this Subdivision to be paid an amount may be met:

(a) by paying the amount to the account-holder as a single amount or in instalments determined by APRA; or

(b) by applying the amount, as a single amount or in instalments determined by APRA, for the account-holder’s benefit, by establishing an account with an ADI on behalf of the account-holder or in another way; or

(c) by paying part of the amount to the account-holder and applying the rest of the amount for the account-holder’s benefit.

(2) The regulations may make provision for or in relation to the ways in which account-holders’ entitlements under this Subdivision to be paid amounts may be met.

Establishment of account by APRA for meeting entitlement

(3) APRA may establish, on behalf of an account-holder who has an entitlement under this Subdivision, an account with an ADI (except a declared ADI) for the purposes of wholly or partly meeting the entitlement.

(4) Subsection (3) has effect:

(a) whether or not the account-holder consents to the establishment of the account; and

(b) despite any other law of the Commonwealth relating to the establishment of such an account.

(5) If an account-holder has an entitlement under this Subdivision connected with a protected account of a kind prescribed by the regulations for the purposes of this subsection, APRA must establish an account of the same kind on behalf of the account-holder for the purposes of wholly or partly meeting the entitlement.

Act to meet entitlement is not provision of designated service

(6) An act done by any of the following persons for the purposes of meeting an account-holder’s entitlement under this Subdivision is taken, for the purposes of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, not to be the provision of a designated service by the person:

(a) APRA;

(b) the Reserve Bank.

Note: One effect of subsection (6) is that the person’s act does not make the person a reporting entity for the purposes of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

Exemption from section 32 of Anti-Money Laundering Act

(7) Section 32 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 does not apply to a designated service described in item 1 of the table in subsection 6(2) of that Act provided by an ADI as a result of the exercise of APRA’s power under subsection (3) of this section (whether or not subsection (5) required APRA to exercise that power).

16AI Substitution of APRA for account-holder as ADI’s creditor

(1) When an ADI becomes a declared ADI, then, by force of this subsection, the right of an account-holder who has a protected account with the ADI to be paid an amount by the ADI in connection with the account:

(a) is reduced to the extent of the account-holder’s entitlement under this Subdivision connected with the account; and

(b) to the extent of the reduction, becomes a right of APRA.

(2) APRA may exercise or assign a right it has under paragraph (1)(b).

Note: Under section 11 of the Australian Prudential Regulation Authority Act 1998, APRA’s property is generally held on behalf of the Commonwealth.

Subdivision D - Administration

16AJ Requiring assistance

APRA may, by written notice given to any of the following persons, require the person to give APRA such reasonable assistance in the performance of its functions, and the exercise of its powers, under this Division as is specified:

(a) an ADI (whether or not it is a declared ADI);

(b) an administrator appointed under subsection 13A(1) to take control of an ADI’s business;

(c) a liquidator (including a provisional liquidator) appointed in connection with the winding up, or proposed winding up, of an ADI.

Note: APRA may amend or vary the requirement in writing: see subsection 33(3) of the Acts Interpretation Act 1901.

16AK Obtaining information relevant to determining and paying entitlements

(1) APRA may, by written notice given to:

(a) an ADI (whether or not it is a declared ADI); or

(b) an administrator appointed under subsection 13A(1) to take control of an ADI’s business; or

(c) a liquidator (including a provisional liquidator) appointed in connection with the winding up, or proposed winding up, of an ADI;

require the ADI, administrator or liquidator to give a specified person specified information about an account-holder relevant to one or more of the actions described in subsection (4) in a specified way within a reasonable specified time for the person to use in taking one or more of those actions.

Note: APRA may amend or vary the requirement in writing: see subsection 33(3) of the Acts Interpretation Act 1901.

(2) The person specified in the requirement must be one of the following:

(a) APRA;

(b) an APRA member whose duties relate to an action described in subsection (4);

(d) a person to whom APRA has delegated a power or function under this Division that relates to an action described in subsection (4);

(e) a person who is an officer or employee of a person described in paragraph (d) and whose duties relate to an action described in subsection (4).

(3) The information specified in the requirement may be or include either or both of the following:

(a) personal information about the account-holder (if he or she is an individual);

(b) the tax file number (as defined in section 202A of the Income Tax Assessment Act 1936) of the account-holder.

This does not limit the information that may be specified in the requirement.

(4) The actions are as follows:

(a) identifying an account-holder who may have an entitlement under Subdivision C;

(b) determining whether an account-holder has an entitlement under Subdivision C;

(d) meeting an entitlement under Subdivision C;

(e) establishing an account under section 16AH on behalf of an account-holder with an entitlement under Subdivision C;

(f) making a disclosure required by section 16AT in connection with the establishment of an account under section 16AH by APRA on behalf of an account-holder with an entitlement under Subdivision C;

(g) assessing whether and how information could be provided by an ADI (or a liquidator of the ADI, if one is appointed) to enable the actions described in paragraphs (a), (b), (c), (d), (e) and (f) to be taken if the ADI were to become a declared ADI.

(5) Subsection (1) does not apply in relation to a foreign ADI.

(6) This section does not limit section 16AJ.

16AL Enforcing requirement for assistance or information

Requirement made of ADI - civil penalty

(1) An ADI must comply with a requirement made of it under section 16AJ or subsection 16AK(1).

Civil penalty: 10,000 penalty units.

Requirement made of ADI - offence

(2) An ADI commits an offence if:

(a) it does, or fails to do, an act; and

(b) the doing of the act, or the failure to do the act, results in a contravention of a requirement made of the ADI under section 16AJ or subsection 16AK(1).

Penalty: 200 penalty units.

(3) An offence against subsection (2) is an indictable offence.

Note: Section 4K (Continuing and multiple offences) of the Crimes Act 1914 applies to an offence against subsection (2) relating to subsection 16AK(1), so an ADI commits an offence for each day it does not comply with a requirement under that subsection (to give information within a particular time).

Requirement made of ADI - offence by officer

(4) An officer (as defined in section 9 of the Corporations Act 2001) of an ADI commits an offence if:

(a) the officer fails to take reasonable steps to ensure that the ADI complies with a requirement made of it under section 16AJ or subsection 16AK(1); and

(b) the officer’s duties include ensuring that the ADI complies with the requirement.

Penalty: 50 penalty units.

(5) Subsection (4) does not apply to an officer who is a liquidator (including a provisional liquidator) of the ADI.

Note: A defendant bears an evidential burden in relation to the matter in subsection (5): see subsection 13.3(3) of the Criminal Code.

(6) If an officer of an ADI fails to take reasonable steps to ensure that the ADI complies with a requirement made of it under subsection 16AK(1) in circumstances that give rise to the officer committing an offence against subsection (4) of this section, the officer commits an offence against that subsection in respect of:

(a) the first day on which the offence is committed; and

(b) each subsequent day (if any) on which the circumstances that gave rise to the officer committing the offence continue (including the day of conviction for any such offence or any later day).

Note: This subsection does not affect the application of section 4K of the Crimes Act 1914 to other offences against this Act (including subsection (2)) or the regulations.

Liquidator to comply with requirement made of liquidator

(7) A liquidator (including a provisional liquidator) must comply with a requirement made of the liquidator under section 16AJ or subsection 16AK(1).

Note: Action may be taken under the Corporations Act 2001 against a liquidator who does not comply with such a requirement.

16AM Recovery of overpayments

The regulations may make provision for and in relation to the recovery by APRA of the excess of an amount paid to, or applied for the benefit of, an account-holder purportedly to meet an entitlement of the account-holder under Subdivision C over the account-holder’s entitlement (if any) under that Subdivision.

16AN APRA may delegate functions and powers under this Division

(1) APRA may, by writing under its seal, delegate any or all of APRA’s functions and powers under this Division to a person.

(2) In performing or exercising functions or powers delegated under subsection (1), the delegate must comply with any directions given by APRA.

(3) This section does not limit section 15 of the Australian Prudential Regulation Authority Act 1998.

Note: Section 15 of the Australian Prudential Regulation Authority Act 1998:

(a) makes the agreement of the Chair of ASIC a condition for a delegation to an ASIC member or an ASIC staff member; and

(b) makes the agreement of the Governor of the Reserve Bank a condition for a delegation to the Governor or Deputy Governor of the Reserve Bank or to an officer of the Reserve Bank Service.

16AO APRA’s costs of administration

(1) The costs incurred by APRA in relation to the exercise of its powers and the performance of its functions under this Division (whether by APRA or by a delegate) relating to a declared ADI are a debt due by the declared ADI to APRA.

(2) The debt is admissible to proof against the declared ADI in the winding up of the ADI.

(3) Subsection (1) does not apply to the amounts of entitlements under Subdivision C.

Note: APRA may be able to recover those amounts through the rights it acquires under section 16AI from the account-holder.

Subdivision E - Account-holder’s claims against ADI remaining after entitlement

16AP When this Subdivision applies

This Subdivision applies if:

(a) a court orders the winding up of an ADI that becomes a declared ADI before, on or after the order is made; and

(b) on making the order, the court appoints a liquidator of the ADI; and

(c) an account-holder has an entitlement under Subdivision C connected with a protected account the account-holder has with the ADI; and

(d) after the operation of section 16AI of this Act, section 553C of the Corporations Act 2001 and, if relevant, section 554B of that Act, there is still a debt payable by the ADI to the account-holder, or a claim of the account-holder against the ADI, based on a right to be paid an amount by the ADI in connection with the protected account.

16AQ Liquidator may admit debt or claim without normal proof

(1) The liquidator may admit the debt or claim even if it has not been proved by the account-holder in accordance with the Corporations Act 2001 and regulations made under that Act.

(2) However, the liquidator must act in accordance with the regulations (if any) made for the purposes of this subsection in deciding whether to admit or reject the debt or claim, and the extent to which to admit or reject the debt or claim.

Note: This section overrides any requirements imposed on the liquidator by the Corporations Act 2001 and regulations under that Act in relation to proof of the debt or claim and a decision whether to admit or reject the debt or claim: see section 70B of this Act.

16AR How liquidator must pay distributions to account-holder

(1) This section applies if, in the winding up of the ADI, a distribution attributable to the protected account is payable to the account-holder and the protected account was of a kind prescribed by the regulations for the purposes of this subsection.

(2) The liquidator must pay the distribution (so far as it is attributable to the account) into an account of the same kind that is held by the account-holder with an ADI (except a declared ADI).

(3) If the account-holder does not hold an account of that kind, the liquidator must establish, on behalf of the account-holder, an account of that kind with an ADI (except a declared ADI) for the payment of the distribution in accordance with subsection (2).

(4) Subsection (3) empowers the liquidator to establish the account:

(a) whether or not the account-holder consents to the establishment of the account; and

(b) despite any other law of the Commonwealth relating to the establishment of such an account.

16AS APRA may disclose relevant personal information to liquidator

Information about account-holder’s entitlement

(1) APRA may disclose to the liquidator personal information about the fact that the account-holder has an entitlement under Subdivision C, and the amount of that entitlement, for the purpose of enabling the liquidator to decide whether to admit or reject the debt or claim in whole or in part.

Information relevant to section 16AR

(2) APRA may disclose to the liquidator personal information about the account-holder for the purpose of enabling the liquidator to determine whether subsection 16AR(2) or (3) applies and, if it does, for complying with it.

Subdivision F - Disclosure of information relating to new accounts

16AT APRA or liquidator to disclose information to ADI

(1) This section applies if, on behalf of an account-holder with an entitlement under Subdivision C:

(a) APRA establishes an account with an ADI under section 16AH; or

(b) a liquidator establishes an account with an ADI under section 16AR.

(2) In the circumstances prescribed by the regulations, whichever of APRA and the liquidator established the account must disclose to the ADI the information (if any) that:

(a) is connected with the establishment of the account; and

(b) is prescribed by the regulations for the purposes of this paragraph.

(3) The regulations may prescribe different information in relation to different circumstances for disclosure.

(4) The information prescribed by the regulations may be personal information about the account-holder (if he or she is an individual). This does not limit the information that may be prescribed by the regulations.

Subdivision G - Exceptions to Part IV of the Trade Practices Act 1974

16AU Exceptions to Part IV of the Trade Practices Act 1974

For the purposes of subsection 51(1) of the Trade Practices Act 1974, the following things are specified and specifically authorised:

(a) anything done in the exercise of powers, or performance of functions, under this Division, or regulations made for the purposes of this Division, except Subdivision E;

(b) anything done to enable or facilitate the exercise of those powers or performance of those functions;

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