Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 (40 of 2019)

Schedule 4   Approval to own or control an RSE licensee

Part 1   Amendments

Superannuation Industry (Supervision) Act 1993

10   After Division 1 of Part 16A

Insert:

Division 2 - Directions to relinquish control over an RSE licensee

131E Object of this Division

The object of this Division is to enable the Regulator to direct a person who is in control of an RSE licensee to relinquish that control if there has been, is or is likely to be interference with the ability of the RSE licensee to satisfy its obligations in relation to a superannuation entity.

131EA Application of this Division

This Division applies in relation to an RSE licensee that is a body corporate.

131EB Direction to relinquish control

(1) The Regulator may give a person a direction to relinquish control of an RSE licensee if:

(a) the Regulator has reason to believe that:

(i) the person has a controlling stake in the RSE licensee; or

(ii) the person has practical control of the RSE licensee; and

(b) the Regulator has reason to believe that because of:

(i) the person's controlling stake, or practical control, of the RSE licensee; or

(ii) the way in which control has been, is or is likely to be exercised;

the RSE licensee has been, is or is likely to be unable to satisfy one or more of the trustee's obligations contained in a covenant set out in sections 52 to 53, or prescribed under section 54A.

(2) The Regulator may give a person a direction to relinquish control of an RSE licensee if:

(a) the Regulator has reason to believe that the person has a controlling stake in the RSE licensee; and

(b) the person does not have approval under section 29HD to hold a controlling stake in the RSE licensee.

(3) The Regulator may give a person a direction to relinquish control of an RSE licensee if:

(a) the Regulator has reason to believe that that the person has a controlling stake in the RSE licensee; and

(b) the person has approval under section 29HD to hold a controlling stake in the RSE licensee; and

(c) information given to the Regulator in relation to the application for approval was false or misleading in a material particular.

(4) To avoid doubt, a direction under subsection (1) or (3) to a person to relinquish a controlling stake in an RSE licensee may be given even if the person has approval to hold a controlling stake in the RSE licensee.

(5) The direction must be given in writing.

(6) The Regulator must give the person:

(a) a copy of the direction; and

(b) a statement of the Regulator's reasons for giving the direction.

(7) The Regulator may revoke a direction to relinquish control of an RSE licensee.

(8) The revocation must be in writing and a copy of the revocation must be given to the person.

131EC Meaning of practical control

A person has practical control over an RSE licensee that is a body corporate if:

(a) either of the following is satisfied:

(i) the directors of the RSE licensee are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person (either alone or together with associates);

(ii) the person (either alone or together with associates) is in a position to exercise control over the RSE licensee; and

(b) the person does not hold a controlling stake in the RSE licensee.

131ED Consequences of a direction to relinquish control

(1) If the Regulator gives a person a direction to relinquish control over an RSE licensee, the person must take such steps as are necessary to ensure that:

(a) the directors of the RSE licensee are not accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person (either alone or together with associates); and

(b) the person (either alone or together with associates) is not in a position to exercise control over the RSE licensee; and

(c) the person does not hold a controlling stake in the RSE licensee.

(2) The person must take those steps:

(a) within 90 days after being given a copy of the direction; or

(b) if the Regulator, by written notice given to the person, allows a longer period for compliance - before the end of that longer period.

(3) A person commits an offence if:

(a) the person is subject to a requirement under this section; and

(b) the person intentionally or recklessly contravenes the requirement.

Penalty: 400 penalty units.

Note: Section 4K (Continuing and multiple offences) of the Crimes Act 1914 applies to an offence under subsection (3), so a person commits an offence, after the period for relinquishment expires, on each day on which the person does not relinquish control.

131EE Interim orders

Orders where the direction is stayed by the Administrative Appeals Tribunal

(1) The Regulator may apply to the Federal Court of Australia (the Federal Court ) for orders under subsection (2) if:

(a) the Regulator has given a direction to relinquish control over an RSE licensee to a person; and

(b) an application has been made to the Administrative Appeals Tribunal for a review of the decision to give the direction; and

(c) the Tribunal has made an order or orders staying or otherwise affecting the operation or implementation of the decision to give the direction, or a part of that decision.

(2) The Federal Court may make such orders as the court considers appropriate to ensure that the person does not, during the period to which an order of the Tribunal relates, exercise control over the RSE licensee in a manner that results in the RSE licensee being unable to satisfy one or more of the trustee's obligations contained in a covenant set out in sections 52 to 53, or prescribed under section 54A.

Orders to deal with conduct during the compliance period

(3) The Regulator may apply to the Federal Court of Australia (the Federal Court ) for orders under subsection (4) if:

(a) a direction to relinquish control over an RSE licensee is in force in relation to a person; and

(b) the Regulator has reason to believe that the person may, during the period under subsection 131ED(2) during which the person is required to take steps under the direction (the compliance period ), exercise control over the RSE licensee in a manner that results in the RSE licensee being unable to satisfy one or more of the trustee's obligations contained in a covenant set out in sections 52 to 53, or prescribed under section 54A.

(4) The Federal Court may make such orders as the court considers appropriate to ensure that the person does not, during the compliance period, exercise control over the RSE licensee in a manner that results in the RSE being unable to satisfy one or more of the trustee's obligations contained in a covenant set out in sections 52 to 53, or prescribed under section 54A.

131EF Remedial orders

(1) The Regulator may apply to the Federal Court of Australia (the Federal Court ) for orders under this section if a direction to relinquish control over an RSE licensee is in force in relation to a person.

(2) The Federal Court may make such orders as the court considers appropriate to ensure that:

(a) the directors of the RSE licensee are not accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person (either alone or together with associates); and

(b) the person (either alone or together with associates) is not in a position to exercise control over the RSE licensee; and

(c) the person does not hold a controlling stake in the RSE licensee.

(3) However, the Federal Court may only make orders under this section if the court is satisfied that:

(a) both of the following are satisfied:

(i) the person holds a controlling stake in the RSE licensee, or has practical control of the RSE licensee;

(ii) because of the person's control of the RSE licensee, or the way in which that control has been, is or is likely to be exercised, the RSE licensee has been, is or is likely to be unable to satisfy one or more of the trustee's obligations contained in a covenant set out in sections 52 to 53, or prescribed under section 54A; or

(b) both of the following are satisfied:

(i) the person holds a controlling stake in the RSE licensee;

(ii) the person does not have approval under section 29HD to hold a controlling stake in the RSE licensee; or

(c) each of the following is satisfied:

(i) the person has a controlling stake in the RSE licensee;

(ii) the person has approval under section 29HD to hold a controlling stake in the RSE licensee;

(iii) information given to the Regulator in relation to the application for approval was false or misleading in a material particular.

(4) The Federal Court's orders include:

(a) an order directing the disposal of shares; or

(b) an order restraining the exercise of any rights attached to shares; or

(c) an order prohibiting or deferring the payment of any sums due to a person in respect of shares held by the person; or

(d) an order that any exercise of rights attached to shares be disregarded.

(5) Subsection (4) does not, by implication, limit subsection (2).

(6) In addition to the Federal Court's powers under subsections (2) and (4), the court:

(a) has power, for the purpose of securing compliance with any other order made under this section, to make an order directing any person to do or refrain from doing a specified act; and

(b) has power to make an order containing such ancillary or consequential provisions as the court thinks just.

(7) The Federal Court may, before making an order under this section, direct that notice of the Regulator's application be given to such persons as it thinks fit or be published in such manner as it thinks fit, or both.

(8) The Federal Court may, by order, rescind, vary or discharge an order made by it under this section or suspend the operation of such an order.