Prepared by the Office of Parliamentary Counsel, Canberra

Authorised Version C2016C00750 registered 07/07/2016

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

For more information about any editorial changes made in this compilation, see the endnotes.

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

Authorised Version C2016C00750 registered 07/07/2016

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

Contents

1 Short title ........................................................................................... 1

2 Commencement ................................................................................. 1

4 Repeal ................................................................................................ 1

5 Interpretation ..................................................................................... 1

6 Application of Act ............................................................................. 9

6A Cessation of application of Act to Territory ...................................... 9

7 Person other than a body corporate must not carry on banking business .............................................................................. 10

8 Only the Reserve Bank and bodies corporate that are ADIs may carry on banking business ........................................................ 10

9 Authority to carry on banking business ........................................... 11

9A Revocation of authority ................................................................... 14

9B Bodies that cease to exist or change their names ............................. 16

9C Publication of list of ADIs ............................................................... 17

10 APRA to be supplied with certain documents ................................. 17

11 APRA may determine that provisions of this Act do not apply ................................................................................................ 18

11AA Authority to be a NOHC .................................................................. 20

11AB Revocation of authority ................................................................... 22

11AC Bodies that cease to exist or change their names ............................. 24

11AD Publication of list of NOHCs ........................................................... 25

11AF APRA may make prudential standards for ADIs and authorised NOHCs........................................................................... 26

11A Prudential requirements may also be prescribed by the regulations ....................................................................................... 28

11B APRA to monitor prudential matters ............................................... 28

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11CA APRA may give directions in certain circumstances ....................... 30

11CB APRA may certify an industry support contract .............................. 35

11CC APRA may direct parties to an industry support contract to comply with the contract ................................................................. 35

11CD Direction not grounds for denial of obligations ............................... 36

11CE Supply of information about issue and revocation of directions ......................................................................................... 38

11CF Secrecy requirements ....................................................................... 39

11CG Non-compliance with a direction ..................................................... 39

11E Division 2 not applicable to foreign ADIs ....................................... 41

11F Assets of foreign ADIs .................................................................... 41

12 APRA to protect depositors ............................................................. 42

13 ADI to supply information to APRA ............................................... 42

13A Consequences of inability or failure of ADI to meet obligations ....................................................................................... 43

13B Investigators—ADI must provide information and facilities ........... 46

13BA Start of control of ADI’s business by ADI statutory manager ......... 47

13C ADI statutory managers—termination of control ............................ 48

13D Who this Subdivision applies to ...................................................... 49

13E Recapitalisation direction by APRA ................................................ 50

13F Additional contents of a recapitalisation direction .......................... 51

13G Compliance with a recapitalisation direction ................................... 51

13H APRA must obtain expert’s report on the fair value of shares etc. ................................................................................................... 52

13J Determination of the fair value of shares by an expert .................... 53

13K Determination of the fair value of rights by an expert ..................... 53

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13M Contravention of certain provisions does not affect the validity of recapitalisation direction etc. .......................................... 54

13N Recapitalisation direction not grounds for denial of obligations ....................................................................................... 55

13P Supply of information about issue and revocation of recapitalisation directions ................................................................ 55

13Q Non-compliance with a recapitalisation direction ........................... 57

14A ADI statutory manager’s powers and functions ............................... 59

14AA ADI statutory manager’s additional powers to facilitate recapitalisation ................................................................................. 61

14AB Considering report before acting under section 14AA .................... 62

14AC Act under section 14AA not ground for denying obligation ............ 65

14AD APRA may require a person to give information etc. for the purposes of this Division ................................................................. 66

14B Administrator in control—additional powers to recommend action by APRA ............................................................................... 67

14C ADI statutory manager’s liabilities and duties ................................. 68

14D Administrator in control—additional duties .................................... 69

14DAA Administrator in control—additional duties where action may affect financial system stability in Australia ............................ 70

14DA Administrator in control—additional duties where action may affect financial system stability in New Zealand ..................... 70

14E Termination of administrator’s appointment ................................... 71

14F APRA’s powers to apply for ADI to be wound up .......................... 72

15 Effect on directors of ADI statutory manager taking control of an ADI’s business ....................................................................... 72

15A Effect on external administrator of ADI statutory manager taking control of an ADI’s business ................................................ 73

15B Effect on legal proceedings of ADI statutory manager taking control of an ADI’s business ........................................................... 73

15C ADI statutory manager being in control not grounds for denial of obligations ........................................................................ 74

15D Continued application of other provisions ....................................... 74

16 Costs of statutory management ........................................................ 75

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16AB Purpose of this Division .................................................................. 77

16AC APRA’s functions relating to this Division ..................................... 77

16AD Declaration that Subdivision C applies in relation to ADI............... 77

16AE Advice and information for decision on making declaration ........... 79

16AF Payment of account-holders with declared ADI .............................. 79

16AG Limit on payments to account-holder with declared ADI ................ 81

16AH Payment ........................................................................................... 81

16AHA Giving information about payments in a financial year ................... 83

16AI Substitution of APRA for account-holder as ADI’s creditor ........... 84

16AJ Requiring assistance ........................................................................ 85

16AK Obtaining information relevant to determining and paying entitlements ..................................................................................... 86

16AL Enforcing requirement for assistance or information ....................... 88

16AM Recovery of overpayments .............................................................. 89

16AN APRA may delegate functions and powers under this Division ........................................................................................... 90

16AO APRA’s costs of administration ...................................................... 90

16AP When this Subdivision applies......................................................... 91

16AQ Liquidator may admit debt or claim without normal proof .............. 91

16AR How liquidator must pay distributions to account-holder ................ 92

16AS APRA may disclose relevant personal information to liquidator ......................................................................................... 92

16AT APRA or liquidator to disclose information to ADI ........................ 93

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16AV Appointed auditor’s functions and duties ........................................ 95

16B Auditors to give information to APRA on request........................... 95

16BA Requirement for auditors to give information about ADIs .............. 96

16C Auditor may provide information to APRA .................................. 100

16D Appointed auditor must notify APRA of attempts to unduly influence etc. the appointed auditor ............................................... 101

16E Giving false or misleading information to auditor ......................... 102

17 APRA may remove an auditor of an ADI ...................................... 104

18 Referring matters to professional associations for auditors ........... 105

18A Enforceable undertakings .............................................................. 107

19 Disqualified persons must not act for ADIs or authorised NOHCs .......................................................................................... 108

21 Court power of disqualification ..................................................... 111

22 Court power to revoke or vary a disqualification etc. .................... 113

22A Privilege against exposure to penalty—disqualification under section 21 ....................................................................................... 114

23 APRA may remove a director or senior manager of an ADI or authorised NOHC ...................................................................... 115

24 Guide to this Division .................................................................... 118

25 Application of Division ................................................................. 118

26 Covered bonds ............................................................................... 118

27 Arrangements involving several ADIs .......................................... 120

28 Restrictions on issuing covered bonds—8% rule .......................... 120

29 Restrictions on issuing covered bonds—APRA directions ............ 120

30 Cover pool monitors ...................................................................... 121

31 Assets that may be in cover pools .................................................. 122

31A Maintenance of cover pools ........................................................... 123

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31C Powers and obligations of ADI statutory manager or external administrator .................................................................................. 125

31D Prudential standards—treatment of assets and liabilities ............... 125

31E Prudential standards for covered bonds ......................................... 126

31F APRA may direct covered bond special purpose vehicles to return certain assets ....................................................................... 127

32 Interpretation ................................................................................. 129

33 Transfer of foreign currency to Reserve Bank ............................... 129

34 Payment for transferred foreign currency ...................................... 131

35 Sale of foreign currency by Reserve Bank .................................... 131

36 Advance policy .............................................................................. 132

38A Operation of certain State and Territory laws relating to ADI mergers .......................................................................................... 134

39 Power to make regulations ............................................................ 136

39A Extra-territorial application of regulations ..................................... 142

40 Operation of Part ........................................................................... 143

41 Transfer of gold out of Australia ................................................... 143

42 Delivery of gold ............................................................................. 144

43 Vesting of gold delivered .............................................................. 145

44 Payment for gold ........................................................................... 145

45 Limitation of sale and purchase of gold ......................................... 145

46 Limitation on working of gold ....................................................... 147

47 Application of Part ........................................................................ 147

48 Exemptions .................................................................................... 147

50 Control of interest rates ................................................................. 149

51A Definitions ..................................................................................... 150

51B Reconsideration of decisions ......................................................... 150

51C Review of decisions ....................................................................... 151

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52A Disclosures qualifying for whistleblower protection ..................... 153

52B Whistleblower protection for disclosures that qualify ................... 154

52C Victimisation of whistleblowers prohibited ................................... 155

52D Right to compensation ................................................................... 156

52E Confidentiality requirement for company, company officers and employees and auditors ........................................................... 157

52F Self-incrimination .......................................................................... 159

60 Keeping of financial records .......................................................... 160

61 APRA may conduct investigations ................................................ 161

62 Supply of information .................................................................... 163

62A Notices to APRA ........................................................................... 165

62B Involving APRA in applications to appoint external administrators of ADIs .................................................................. 167

62C Involving APRA in applications by liquidator .............................. 168

63 Restructuring of ADIs ................................................................... 168

64 Conditions on consent to restructure an ADI ................................. 170

65 ADIs and authorised NOHCs may be directed to comply with Act ......................................................................................... 171

65A Injunctions ..................................................................................... 172

65B Civil penalties ................................................................................ 175

66 Restriction on use of certain words and expressions ..................... 175

67 Restriction on establishment or maintenance of representative offices of overseas banks ........................................ 180

68 Bank holidays ................................................................................ 182

69 Unclaimed moneys ........................................................................ 182

69A Disclosure of information relating to unclaimed moneys .............. 188

69B Powers about money of depositors who have died ........................ 188

69C Conduct of directors, employees and agents .................................. 189

69D Disclosure of information received under Act prohibited in certain circumstances ..................................................................... 190

69E Compensation for acquisition of property ..................................... 190

69F Severability .................................................................................... 191

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70B Act has effect despite the Corporations Act .................................. 194

70C Authorising contracts etc. for protecting depositors’ interests and financial system stability......................................................... 194

70D Borrowing funds for payments under authorised contracts etc. ................................................................................................. 196

70E Financial System Stability Special Account .................................. 196

70F Credits to the Account ................................................................... 197

70G Purposes of the Account ................................................................ 197

70H Debits to reflect reduced amounts specified in authorisations ....... 198

71 Regulations .................................................................................... 198

1 Federal Court may order person to pay pecuniary penalty for contravening civil penalty provision .............................................. 201

2 Contravening a civil penalty provision is not an offence ............... 202

3 Persons involved in contravening civil penalty provision ............. 202

4 Recovery of a pecuniary penalty ................................................... 202

5 Civil evidence and procedure rules for pecuniary penalty orders ............................................................................................. 203

6 Civil proceedings after criminal proceedings ................................ 204

7 Criminal proceedings during civil proceedings ............................. 204

8 Criminal proceedings after civil proceedings ................................ 204

9 Evidence given in proceedings for penalty not admissible in criminal proceedings ..................................................................... 205

Authorised Version C2016C00750 registered 07/07/2016

Section 1

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

The following Acts are repealed:

(1) In this Act, unless the contrary intention appears:

Section 5

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Section 5

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(b) that is a NOHC of an ADI or ADIs.

(a) a business that consists of banking within the meaning of paragraph 51(xiii) of the Constitution; or

(b) a business that is carried on by a corporation to which paragraph 51(xx) of the Constitution applies and that consists, to any extent, of:

(i) both taking money on deposit (otherwise than as part-payment for identified goods or services) and making advances of money; or

(ii) other financial activities prescribed by the regulations for the purposes of this definition.

(a) the words “civil penalty” and one or more amounts in penalty units are set out at the foot of the subsection (or section); or

(b) another provision of this Act specifies that the subsection (or section) is a civil penalty provision.

Note: Schedule 2 deals with contraventions of civil penalty provisions, and treats people who are involved in various ways in such a contravention as if they had contravened the provision concerned.

Section 5

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(a) a liquidator or provisional liquidator;

(b) a receiver, manager, managing controller, receiver and manager or other controller (other than an ADI statutory manager);

(c) a voluntary administrator or administrator of a deed of a company arrangement or a scheme manager.

(a) is a foreign corporation within the meaning of paragraph 51(xx) of the Constitution; and

(b) is authorised to carry on banking business in a foreign country; and

(c) has been granted an authority under section 9 to carry on banking business in Australia.

Authorised Version C2016C00750 registered 07/07/2016

Section 5

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event occurs. The contract may also deal with matters associated with the provision of the financial support.

(a) of which the first body corporate is a subsidiary; and

(b) that does not carry on a business (other than a business consisting of the ownership or control of other bodies corporate); and

(c) that is incorporated in Australia.

Section 5

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(a) the Reserve Bank of New Zealand;

(b) an authority of the government of New Zealand that:

(i) has statutory responsibilities relating to prudential regulation or financial system stability; and

(ii) is prescribed by the regulations for the purposes of this definition.

(a) the conduct by an ADI, an authorised NOHC, a relevant group of bodies corporate, or a particular member or members of such a group, of any part of its or their affairs in such a way as:

(i) to keep the ADI, NOHC, group or member or members of the group in a sound financial position; or

(ii) not to cause or promote instability in the Australian financial system; or

(iii) not to cause or promote instability in the New Zealand financial system; or

(b) the conduct by an ADI, an authorised NOHC, a relevant group of bodies corporate, or a particular member or members of such a group, of its or their affairs with integrity, prudence and professional skill.

Section 5

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(3) For the purposes of this Act:

Section 5

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(a) is an account that is prescribed by the regulations for the purposes of this paragraph; or

(b) is an account, or covered financial product, that is kept under an agreement between the account-holder and the ADI requiring the ADI to pay the account-holder, on demand by the account-holder or at a time agreed by them, the net credit balance of the account or covered financial product at the time of the demand or the agreed time (as appropriate).

(a) it is recorded in Australian currency; or

(b) it is kept with an ADI that is a declared ADI on 12 October 2011.

(9) A declaration made under subsection (8), or an amendment of the declaration, is a legislative instrument, but section 42

Authorised Version C2016C00750 registered 07/07/2016

Section 6

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(1) Nothing in Part II or V, or in sections 61 to 69 (inclusive), applies with respect to State banking.

(2) Subject to section 6A, this Act extends to all the Territories.

Section 7

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(1) A person commits an offence if:

(a) the person carries on any banking business in Australia; and

(b) the person is not a body corporate; and

(c) there is no determination in force under section 11 that this subsection does not apply to the person.

Penalty: 200 penalty units.

(2) An offence against subsection (1) is an indictable offence.

(3) If a person carries on banking business in circumstances that give rise to the person committing an offence against subsection (1), the person 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 person committing the offence continue (including the day of conviction for any such offence or any later day).

Section 9

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(a) the body corporate carries on any banking business in Australia; and

(b) the body corporate is not the Reserve Bank; and

(c) the body corporate is not an ADI; and

(d) there is no determination in force under section 11 that this subsection does not apply to the body corporate.

Penalty: 200 penalty units.

(2) An offence against subsection (1) is an indictable offence.

(3) If a body corporate carries on banking business in circumstances that give rise to the body corporate committing an offence against subsection (1), the body corporate 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 body corporate committing the offence continue (including the day of conviction for any such offence or any later day).

(2) A body corporate which desires authority to carry on banking business in Australia may apply in writing to APRA for authority accordingly.

Section 9

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(2A) APRA may, by legislative instrument, set criteria for the granting of an authority to carry on banking business in Australia.

(3) If an application has been made, APRA may grant the body corporate an authority to carry on banking business in Australia. The authority must be in writing, and APRA must give the body corporate written notice of the granting of the authority.

Note 1: The fact that a body corporate is granted an authority to carry on banking business in Australia does not mean it is entitled to call itself a bank. To do this, the body corporate will need to have a consent under section 66.

Note 2: For APRA’s power to revoke an authority, see section 9A.

(3A) Without limiting the circumstances in which APRA may refuse an application by a body corporate for authority to carry on banking business in Australia, APRA may refuse such an application if the body corporate is a subsidiary of another body corporate that does not hold a NOHC authority.

(4) APRA may, at any time, by notice in writing served on the body corporate concerned:

(a) impose conditions, or additional conditions, on an authority; or

(b) vary or revoke conditions imposed on an authority.

The conditions must relate to prudential matters.

(4A) Without limiting the conditions that APRA may impose under subsection (4) on an ADI’s authority, APRA may make the authority conditional on a body corporate of which the ADI is a subsidiary being an authorised NOHC.

(5) A condition may be expressed to have effect notwithstanding anything in the prudential standards or the regulations.

(6) An ADI commits an offence if:

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

Section 9

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(c) there is no determination in force under section 11 that this subsection does not apply to the ADI.

Penalty: 200 penalty units.

(6A) An offence against subsection (6) is an indictable offence.

(6B) If an ADI does or fails to do an act in circumstances that give rise to the ADI committing an offence against subsection (6), the ADI 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 ADI committing the offence continue (including the day of conviction for any such offence or any later day).

(7) If APRA:

(a) grants an authority under subsection (3); or

(b) imposes, varies or revokes conditions under subsection (4);

(8) A failure to comply with subsection (7) does not affect the validity of the action concerned.

(9) Part VI applies to the following decisions under this section:

(a) a decision to refuse an application under this section;

(b) a decision to impose conditions, or additional conditions, on an authority;

Section 9A

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(1) APRA must revoke a body corporate’s section 9 authority if:

(a) the body corporate, by notice in writing to APRA, requests the revocation of the authority; and

(b) APRA is satisfied that the revocation of the authority:

(i) would not be contrary to the national interest; and

(ii) would not be contrary to the interests of depositors of the body corporate.

(2) APRA may revoke a body corporate’s section 9 authority if APRA is satisfied that:

(aa) the body corporate has, whether before or after the commencement of this paragraph, provided, in connection with its application for the authority, information that was false or misleading in a material particular; or

(a) the body corporate has failed to comply with:

(ii) a direction under Division 1BA or section 29; or

(iii) a condition of its section 9 authority; or

(b) it would be contrary to the national interest for the authority to remain in force; or

(ba) it would be contrary to financial system stability in Australia for the authority to remain in force; or

(c) it would be contrary to the interests of depositors of the body corporate for the authority to remain in force; or

(d) the body corporate has failed to pay:

Section 9A

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(f) the body corporate has ceased to carry on banking business in Australia.

The procedures to be undergone before a revocation under this subsection are set out in subsection (3). Those procedures apply unless APRA determines under subsection (4) that they are not to apply.

(3) Subject to subsection (4), APRA must not, under subsection (2), revoke a body corporate’s section 9 authority unless:

(a) APRA has given the body corporate a notice in writing advising the body corporate:

(i) that APRA is considering revoking the authority for the reasons specified in the notice; and

(ii) that the body corporate may make submissions to APRA, in accordance with the notice, about the possible revocation; and

(iii) of the date by which any submissions must be made (being a date at least 90 days after the giving of the notice); and

(b) APRA has considered any submissions that were made by the body corporate by the specified date.

(4) APRA may determine that the procedures in subsection (3) do not apply if APRA is satisfied that following those procedures could result in a delay in revocation that would be:

(a) contrary to the national interest; or

(b) contrary to the interests of depositors with the body corporate.

(5) A revocation of a body corporate’s section 9 authority under subsection (1) or (2) must be in writing, and APRA must give the body corporate written notice of the revocation of the authority.

(5A) The notice of revocation of the authority may state that the authority continues in effect in relation to a specified matter or specified period, as though the revocation had not happened, for the purposes of:

Section 9B

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(b) a specified provision of another law of the Commonwealth that is administered by APRA; or

(c) a specified provision of the prudential standards;

and the statement has effect accordingly.

(7) A failure to comply with subsection (5) (so far as it requires a body corporate to be given written notice of a revocation) or with subsection (6) does not affect the validity of a revocation.

(8) Part VI applies to the following decisions under this section:

(a) a decision to refuse to revoke a body corporate’s section 9 authority;

(b) a decision to revoke a body corporate’s section 9 authority, unless APRA has determined, under subsection (4), that the procedures in subsection (3) do not apply.

(1) If APRA is satisfied that a body corporate that has been granted a section 9 authority:

(a) has ceased to exist; or

(b) has changed its name;

Section 9C

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APRA may, from time to time, publish a list of ADIs:

(b) in such other manner as APRA determines.

(1) An application under this Part by a body corporate shall be accompanied by a copy of the Act, charter, deed of settlement, memorandum of association and articles of association of the body corporate, or other document by which the body corporate is constituted.

(2) Every copy of an Act, charter, deed of settlement, memorandum of association, articles of association or other document furnished to APRA under subsection (1) shall be verified by a statutory declaration made by a senior officer of the body corporate concerned.

(3) An ADI commits an offence if:

(a) an alteration is made to the Act, charter, deed of settlement, memorandum of association, articles of association, constitution or other document by which the ADI was constituted as a body corporate; and

(b) the ADI does not, within 3 months of the making of the alteration, give to APRA a written statement:

(i) that sets out particulars of the alteration; and

(ii) that is verified by a statutory declaration made by a senior officer of the ADI; and

(c) there is no determination in force under section 11 that this subsection does not apply to the ADI.

Penalty: 50 penalty units.

Section 11

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(1) APRA may, in writing, determine that any or all of the following provisions of this Act do not apply to a person while the determination is in force:

(a) a provision of Division 1, 1AA or 1A of Part II (other than section 11A, 11B or 11C);

(b) section 66;

(c) section 66A;

(d) section 67;

(e) section 69.

(2) The determination:

(a) may be expressed to apply to a particular person or to a class of persons; and

(b) may specify the period during which the determination is in force; and

(c) may be made subject to specified conditions.

(2A) If APRA makes a determination that applies to a particular person, APRA must also give the person written notice of the determination.

(3) A person commits an offence if:

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

(b) doing, or failing to do, the act results in a contravention of a condition to which a determination under this section is subject (being a determination that is in force and that applies to the person).

Penalty: 200 penalty units.

Section 11

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

(3B) If a person does or fails to do an act in circumstances that give rise to the person committing an offence against subsection (3), the person 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 person committing the offence continue (including the day of conviction for any such offence or any later day).

(4) APRA may, in writing, vary or revoke a determination under this section.

(5) The following instruments made under this section are not legislative instruments:

(a) a determination that applies to a particular person;

(b) an instrument varying or revoking a determination that applies to a particular person.

(6) Otherwise, an instrument made under this section is a legislative instrument.

(7) Part VI applies to the following decisions under this section:

(a) a refusal to determine that one or more provisions of this Act do not apply to a particular person;

Section 11AA

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(1) A body corporate may apply in writing to APRA for an authority under this section. The authority operates as an authority in relation to the body corporate and any ADIs that are subsidiaries of the body corporate from time to time.

Note 1: The body corporate may want the authority:

(a) because APRA refuses or may refuse to grant a subsidiary of the body corporate a section 9 authority unless the body corporate holds a NOHC authority (see subsection 9(3A)); or

(1A) APRA may, by legislative instrument, set criteria for the granting of an authority under this section.

(2) APRA may grant the authority if it considers it is appropriate to do so.

Note: For APRA’s power to revoke the authority, see section 11AB.

(3) APRA may, at any time, by notice in writing given to the body corporate:

(a) impose conditions, or additional conditions, on the authority; and

(b) vary or revoke conditions imposed on the authority.

The conditions must relate to prudential matters.

(4) A condition may be expressed to have effect despite anything in the prudential standards or the regulations.

(5) The body corporate commits an offence if:

Section 11AA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) doing, or failing to do, the act results in a contravention of a condition of the authority; and

(c) there is no determination in force under section 11 that this subsection does not apply to the body corporate.

Penalty: 200 penalty units.

(5A) An offence against subsection (5) is an indictable offence.

(5B) If the body corporate does or fails to do an act in circumstances that give rise to the body corporate committing an offence against subsection (5), the body corporate 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 body corporate committing the offence continue (including the day of conviction for any such offence or any later day).

(6) If APRA:

(a) grants an authority under subsection (2); or

(b) imposes, varies or revokes conditions under subsection (3);

(7) A failure to comply with subsection (6) does not affect the validity of the action concerned.

(8) Part VI applies to the following decisions under this section:

Section 11AB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) a decision to impose conditions, or additional conditions, on an authority;

(c) a decision to vary conditions imposed on an authority.

(1) APRA must revoke a NOHC authority granted to a body corporate if:

(a) the body corporate, by notice in writing to APRA, requests the revocation of the authority; and

(b) APRA is satisfied that revocation of the authority:

(i) would not be contrary to the national interest; and

(ii) would not be contrary to the interests of depositors of any ADI that is a subsidiary of the body corporate.

(2) APRA may revoke a NOHC authority granted to a body corporate if APRA is satisfied that:

(aa) the body corporate has, whether before or after the commencement of this paragraph, provided, in connection with its application for the authority, information that was false or misleading in a material particular; or

(a) the body corporate has failed to comply with:

(ii) a direction under Division 1BA; or

(iii) a condition of its NOHC authority; or

(b) the body corporate has ceased to be a NOHC of any ADI or ADIs; or

(c) it would be contrary to the national interest for the authority to remain in force; or

(ca) it would be contrary to financial system stability in Australia for the authority to remain in force; or

(d) it would be contrary to the interests of depositors of any ADI that is a subsidiary of the body corporate for the authority to remain in force; or

Section 11AB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

The procedures to be undergone before a revocation under this subsection are set out in subsection (3). Those procedures apply unless APRA determines under subsection (4) that they are not to apply.

(3) Subject to subsection (4), APRA must not, under subsection (2), revoke a body corporate’s NOHC authority unless:

(a) APRA has given the body corporate a notice in writing advising the body corporate:

(i) that APRA is considering revoking the authority for the reasons specified in the notice; and

(ii) that the body corporate may make submissions to APRA, in accordance with the notice, about the possible revocation; and

(iii) of the date by which any submissions must be made (being a date at least 90 days after the giving of the notice); and

(b) APRA has considered any submissions that were made by the body corporate by the specified date.

(4) APRA may determine that the procedures in subsection (3) do not apply if APRA is satisfied that following those procedures could result in a delay in revocation that would be:

(a) contrary to the national interest; or

(b) contrary to the interests of depositors of any ADI that is a subsidiary of the body corporate.

(5) A revocation of a body corporate’s NOHC authority under subsection (1) or (2) must be in writing, and APRA must give the body corporate written notice of the revocation of the authority.

Section 11AC

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

specified period, as though the revocation had not happened, for the purposes of:

(a) a specified provision of this Act or the regulations; or

(b) a specified provision of another law of the Commonwealth that is administered by APRA; or

(c) a specified provision of the prudential standards;

and the statement has effect accordingly.

(7) A failure to comply with subsection (5) (so far as it requires a body corporate to be given written notice of a revocation) or with subsection (6) does not affect the validity of a revocation.

(8) Part VI applies to the following decisions under this section:

(a) a decision to refuse to revoke a NOHC authority granted to a body corporate;

(b) a decision to revoke a NOHC authority granted to a body corporate, unless APRA has determined, under subsection (4), that the procedures in subsection (3) do not apply.

(1) If APRA is satisfied that a body corporate that has been granted a NOHC authority:

(a) has ceased to exist; or

(b) has changed its name;

Section 11AD

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APRA may, from time to time, publish a list of authorised NOHCs:

Section 11AF

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(1) APRA may, in writing, determine standards in relation to prudential matters to be complied with by:

(a) all ADIs; or

(b) all authorised NOHCs; or

(c) a specified class of ADIs or authorised NOHCs; or

(d) one or more specified ADIs or authorised NOHCs.

(1A) A standard may impose different requirements to be complied with in different situations or in respect of different activities.

(1AA) Without limiting the prudential matters in relation to which APRA may determine a standard, a standard may require:

(a) each ADI or authorised NOHC; or

(b) each ADI or authorised NOHC included in a specified class of ADIs or authorised NOHCs; or

(c) a specified ADI or authorised NOHC; or

(d) each of 2 or more specified ADIs or authorised NOHCs;

to ensure that its subsidiaries (or particular subsidiaries), or it and its subsidiaries (or particular subsidiaries), collectively satisfy particular requirements in relation to prudential matters.

(1AB) Without limiting the prudential matters in relation to which APRA may determine a standard, a standard may provide for matters relating to:

(a) the appointment of auditors; or

(b) the conduct of audits.

(2) A standard may provide for APRA to exercise powers and discretions under the standard, including (but not limited to) discretions to approve, impose, adjust or exclude specific

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Section 11AF

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

prudential requirements in relation to one or more specified ADIs or authorised NOHCs.

(3) APRA may, in writing, vary or revoke a standard.

(3A) A standard referred to in paragraph (1)(d), or an instrument varying or revoking such a standard, has effect:

(a) from the day on which the standard, variation or revocation is made; or

(b) if the standard, variation or revocation specifies a later day—from that later day.

(4A) If APRA determines or varies a standard referred to in paragraph (1)(d) it must, as soon as practicable, give a copy of the standard, or of the variation, to the ADI or authorised NOHC, or to each ADI or authorised NOHC, to which the standard applies. Whenever APRA gives a copy of a standard, or of a variation, to an ADI or authorised NOHC, it must also provide a copy to the Treasurer.

(5A) If APRA revokes a standard referred to in paragraph (1)(d) it must, as soon as practicable, give notice of the revocation to the ADI or authorised NOHC, or to each ADI or authorised NOHC, to which the standard applied. Whenever APRA gives a notice of revocation to an ADI or authorised NOHC, it must also provide a copy to the Treasurer.

(7) A failure to comply with subsection (4A) or (5A) does not affect the validity of the action concerned.

(7A) The following instruments made under this section are not legislative instruments:

(a) a standard referred to in paragraph (1)(d);

(b) an instrument varying or revoking a standard referred to in paragraph (1)(d).

Section 11A

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(7BA) A standard may provide for a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time, despite:

(7C) Part VI applies to the following decisions under this section:

(a) a decision to determine a standard referred to in paragraph (1)(d);

(b) a decision to vary such a standard.

(8) In this section:

The regulations may make provision for and in relation to requiring ADIs and authorised NOHCs to observe such requirements in relation to prudential matters as are specified in, or ascertained in accordance with, the regulations.

The functions of APRA include:

(a) the collection and analysis of information in respect of prudential matters relating to ADIs and authorised NOHCs;

(b) the encouragement and promotion of the carrying out by ADIs and authorised NOHCs of sound practices in relation to prudential matters; and

Section 11C

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Section 11CA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) Without limiting subsection (1AA), APRA may give a body corporate that is an ADI or an authorised NOHC a direction of a kind specified in subsection (2) if APRA has reason to believe that:

(a) the body corporate has contravened a provision of:

(i) this Act; or

(b) the body corporate has contravened a prudential requirement regulation or a prudential standard; or

(e) the direction is necessary in the interests of:

(i) if the body corporate is an ADI—depositors of the ADI; or

(ii) if the body corporate is an authorised NOHC—depositors of any ADI that is a subsidiary of the NOHC; or

(f) the body corporate is, or is about to become, unable to meet its liabilities; or

(g) there is, or there might be, a material risk to the security of the body corporate’s assets; or

Section 11CA

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(i) the body corporate is conducting its affairs in an improper or financially unsound way; or

(j) the failure to issue a direction would materially prejudice the interests of:

(i) if the body corporate is an ADI—depositors of the ADI; or

(ii) if the body corporate is an authorised NOHC—depositors of any ADI that is a subsidiary of the NOHC; or

(k) the body corporate is conducting its affairs in a way that may cause or promote instability in the Australian financial system.

(1AA) Without limiting subsection (1), APRA may give a body corporate that is an ADI or is an authorised NOHC a direction of a kind specified in subsection (2) if:

(a) APRA has reason to believe that:

(i) a subsidiary of the body corporate is, or is about to become, unable to meet the subsidiary’s liabilities; or

(ii) there is, or there might be, a material risk to the security of the assets of a subsidiary of the body corporate; or

(iii) there has been, or there might be, a material deterioration in the financial condition of a subsidiary of the body corporate; or

(iv) a subsidiary of the body corporate is conducting the subsidiary’s affairs in an improper or financially unsound way; or

(v) a subsidiary of the body corporate is conducting the subsidiary’s affairs in a way that may cause or promote instability in the Australian financial system; and

(b) APRA considers that the direction is reasonably necessary for one or more prudential matters relating to the body corporate.

(1A) The direction must:

Section 11CA

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(b) specify the ground referred to in subsection (1) or (1AA) as a result of which the direction is given.

(1B) In deciding whether to give a direction under subsection (1) or (1AA) to an ADI, APRA may disregard any external support for the ADI.

(1C) The regulations may specify that a particular form of support is not external support for the purposes of subsection (1B).

(2) The kinds of direction that the body corporate may be given are directions to do, or to cause a body corporate that is its subsidiary to do, any one or more of the following:

(aa) to comply with the whole or a part of:

(i) this Act; or

(ab) to comply with the whole or a part of a condition or direction referred to in paragraph (1)(d);

(a) to comply with the whole or a part of a prudential requirement regulation or a prudential standard;

(b) to order an audit of the affairs of the body corporate, at the expense of the body corporate, by an auditor chosen by APRA;

(c) to remove a director or senior manager of the body corporate from office;

(d) to ensure a director or senior manager of the body corporate does not take part in the management or conduct of the business of the body corporate except as permitted by APRA;

(e) to appoint a person or persons as a director or senior manager of the body corporate for such term as APRA directs;

(f) to remove any auditor of the body corporate from office and appoint another auditor to hold office for such term as APRA directs;

(g) not to give any financial accommodation to any person;

(h) not to accept the deposit of any amount;

Section 11CA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(j) not to accept any payment on account of share capital, except payments in respect of calls that fell due before the direction was given;

(k) not to repay any amount paid on shares;

(l) not to pay a dividend on any shares;

(m) not to repay any money on deposit or advance;

(n) not to pay or transfer any amount or asset to any person, or create an obligation (contingent or otherwise) to do so;

(o) not to undertake any financial obligation (contingent or otherwise) on behalf of any other person;

(p) anything else as to the way in which the affairs of the body corporate are to be conducted or not conducted.

A direction under paragraph (n) not to pay or transfer any amount or asset does not apply to the payment or transfer of money pursuant to an order of a court or a process of execution.

(2AA) However, APRA must not direct, or give a direction that would cause or require, a covered bond special purpose vehicle to:

(a) deal, or not deal, with an asset to the extent that the asset secures covered bond liabilities of an ADI; or

(b) make a payment, or not make a payment, in relation to a covered bond liability of an ADI.

Note: Covered bond special purpose vehicles hold assets that secure liabilities in relation to covered bonds: see Division 3A of Part II.

(2A) Without limiting the generality of subsection (2), a direction referred to in a paragraph of that subsection may:

(a) deal with some only of the matters referred to in that paragraph; or

(b) deal with a particular class or particular classes of those matters; or

(c) make different provision with respect to different matters or different classes of matters.

Section 11CA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(a) a direction that the ADI act in a way that:

(i) a particular asset, or a particular class of assets, of the ADI is returned to the control (however described) of the part of the ADI’s banking business that is carried on in Australia; or

(ii) a particular liability, or a particular class of liabilities, of the ADI ceases to be the responsibility (however described) of the part of the ADI’s banking business that is carried on in Australia;

(b) a direction that the ADI not act in a way that:

(i) a particular asset, or a particular class of assets, of the ADI ceases to be under the control (however described) of the part of the ADI’s banking business that is carried on in Australia; or

(ii) a particular liability, or a particular class of liabilities, of the ADI becomes the responsibility (however described) of the part of the ADI’s banking business that is carried on in Australia.

(3) The direction may deal with the time by which, or period during which, it is to be complied with.

(4) The body corporate has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.

(4A) If the direction requires the body corporate to cause a subsidiary to do, or to refrain from doing, an act or thing:

(a) the body corporate has power to cause the subsidiary to do, or to refrain from doing, the act or thing; and

(b) the subsidiary has power to do, or to refrain from doing, the act or thing;

despite anything in the subsidiary’s constitution or any contract or arrangement to which the subsidiary is a party.

Section 11CB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(5) The direction has effect until APRA revokes it by notice in writing to the body corporate. APRA may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.

(5A) Part VI applies to a decision to give a direction under subsection (1) as a result of the ground referred to in paragraph (1)(a), (b), (c), (d) or (e).

Note 2: For further information about directions, see Subdivision C.

(1) APRA may certify an industry support contract if all of the parties to the contract make a written request to APRA that the contract be certified and APRA considers it appropriate to certify the contract. The certification must be by notice in writing to the parties to the contract.

(2) Part VI applies to a refusal under this section to certify an industry support contract.

(1) APRA may direct any ADI that is a party to an industry support contract that is certified under section 11CB to carry out, or cease to carry out, specified acts if APRA considers:

Section 11CD

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) that the direction is in the interests of the depositors of one or more of the ADIs that are parties to the contract.

The direction must be by notice in writing to the ADI.

(2) The direction may deal with the time by which, or period during which, it is to be complied with.

(3) The ADI has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.

(3A) APRA may vary the direction if, at the time of the variation, it considers that the variation is necessary and appropriate.

(4) The direction has effect until:

(a) APRA revokes the direction by notice in writing to the ADI (see subsection (5)); or

(b) APRA revokes the certification of the industry support contract by notice in writing to the ADIs that are parties to it (see subsection (6)).

(5) APRA may revoke the direction if, at the time of the revocation, it considers that the direction is no longer necessary or appropriate.

(6) APRA may revoke the certification of the industry support contract if it considers that it is appropriate to do so for any reason.

(7) Part VI applies to the following decisions made under this section:

(a) a decision to give a direction;

(b) a decision to vary a direction;

(c) a revocation of the certification of an industry support contract.

(1) This section applies if an ADI, authorised NOHC or subsidiary of an ADI or authorised NOHC is party to a contract, whether the

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Section 11CD

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proper law of the contract is Australian law (including the law of a State or Territory) or law of a foreign country (including the law of part of a foreign country).

(1A) The fact that the ADI or authorised NOHC is subject to a direction by APRA under Subdivision A or B or section 29 does not allow the contract, or a party to the contract, other than the ADI, NOHC or subsidiary, to do any of the following:

(a) deny any obligations under that contract;

(b) accelerate any debt under that contract;

(c) close out any transaction relating to that contract;

(d) enforce any security under that contract.

This subsection has effect subject to subsections (2) and (3) of this section and section 31B.

(2) If the ADI, NOHC or subsidiary is prevented from fulfilling its obligations under the contract because of a direction under Subdivision A, other than a direction under paragraph 11CA(2)(m), or because of a direction under section 29, the other party or parties to the contract are, subject to any orders made under subsection (3), relieved from obligations owed to the ADI or authorised NOHC under the contract.

(3) A party to a contract to which subsection (2) applies may apply to the Federal Court of Australia for an order relating to the effect on the contract of a direction under Subdivision A or section 29. The order may deal with matters including (but not limited to):

(a) requiring a party to the contract to fulfil an obligation under the contract despite subsection (2);

(b) obliging a party to the contract to take some other action (for example, paying money or transferring property) in view of obligations that were fulfilled under the contract before the direction was made.

Section 11CE

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(3) If the Treasurer or the Reserve Bank requests APRA to provide information about:

(a) any directions under Subdivision A or B or section 29 in respect of a particular ADI or authorised NOHC; or

(b) any directions made during a specified period under Subdivision A or B or section 29 in respect of any ADIs or authorised NOHCs;

APRA must comply with the request.

Section 11CF

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(5) If APRA provides the Treasurer or the Reserve Bank with information about a direction and then later revokes the direction, APRA must notify that person of the revocation of the direction as soon as practicable after the revocation. Failure to notify the person does not affect the validity of the revocation.

(1) An ADI or an authorised NOHC commits an offence if:

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

(b) doing, or failing to do, the act results in a contravention of a direction given to it under Subdivision A or B or section 17, 23 or 29.

Penalty: 50 penalty units.

(1A) If an ADI or an authorised NOHC does or fails to do an act in circumstances that give rise to the ADI or NOHC committing an offence against subsection (1), the ADI or NOHC commits an offence against that subsection in respect of:

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

Section 11CG

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continue (including the day of conviction for any such offence or any later day).

(2) An officer of an ADI or an authorised NOHC commits an offence if:

(a) the officer fails to take reasonable steps to ensure that the ADI or NOHC complies with a direction given to it under Subdivision A or B or section 17, 23 or 29; and

(b) the officer’s duties include ensuring that the ADI or NOHC complies with the direction, or with a class of directions that includes the direction.

Penalty: 50 penalty units.

(2A) If an officer of an ADI or an authorised NOHC fails to take reasonable steps to ensure that the ADI or NOHC complies with a direction given to it under Subdivision A or B or section 17, 23 or 29 in circumstances that give rise to the officer committing an offence against subsection (2), 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).

Section 11E

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(1) Division 2 does not apply to a foreign ADI.

(2) A foreign ADI commits an offence if:

(a) it accepts a deposit from a person in Australia; and

(b) before accepting the deposit, the foreign ADI did not inform the person, in a manner approved by APRA, of the requirements of this Act to which the foreign ADI is not subject because of subsection (1).

Penalty: 50 penalty units.

Section 12

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(1) It is the duty of APRA to exercise its powers and functions under this Division for the protection of the depositors of the several ADIs and for the promotion of financial system stability in Australia.

(1) APRA may, by notice in writing to an ADI, require the ADI to supply it, within the time specified in the notice, with such information relating to the ADI’s financial stability as is specified in the notice. The requirement to supply information may include a requirement to supply books, accounts or documents.

(2) The information supplied in compliance with a requirement under subsection (1) must, if required by the notice, be verified by a statutory declaration made by an officer of the ADI concerned who is authorised by the ADI to make the declaration.

(3) An ADI commits an offence if:

Section 13A

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(b) the ADI does not immediately inform APRA of the situation.

Penalty: 200 penalty units.

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

(4) APRA may investigate the affairs of an ADI, or appoint a person to do so, if the ADI fails to comply with a requirement to provide information, books, accounts or documents under this section.

(5) In this section:

Section 13A

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(a) the ADI informs APRA that the ADI considers that it is likely to become unable to meet its obligations or that it is about to suspend payment; or

(b) APRA considers that, in the absence of external support:

(i) the ADI may become unable to meet its obligations; or

(ii) the ADI may suspend payment; or

(iii) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the interests of its depositors; or

(iv) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the stability of the financial system in Australia; or

(c) the ADI becomes unable to meet its obligations or suspends payment.

Note: For information about another circumstance in which APRA may take control of the business of an ADI, see section 65.

(1A) The regulations may specify that a particular form of support for an ADI is not to be considered external support for the purposes of paragraph (1)(b).

(3) If an ADI becomes unable to meet its obligations or suspends payment, the assets of the ADI in Australia are to be available to meet the ADI’s liabilities in the following order:

(a) first, the ADI’s liabilities (if any) to APRA because of the rights APRA has against the ADI because of section 16AI;

Section 13A

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(c) third, the ADI’s liabilities (if any) in Australia in relation to protected accounts that account-holders keep with the ADI;

(d) fourth, the ADI’s debts (if any) to the Reserve Bank;

(e) fifth, the ADI’s liabilities (if any) under an industry support contract that is certified under section 11CB;

(f) sixth, the ADI’s other liabilities (if any) in the order of their priority apart from this subsection.

Note: Subsection (3) applies whatever other consequences flow from the ADI becoming unable to meet its liabilities or suspending payment (such as investigation of the ADI’s affairs, or control of its business, under this Division, or winding up of the ADI).

(3A) The assets of an ADI are taken for the purposes of subsection (3) not to include any interest in an asset (or a part of an asset) in a cover pool for which the ADI is the issuing ADI.

(4) An ADI commits an offence if:

(a) it does not hold assets (excluding goodwill and any assets or other amount excluded by the prudential standards for the purposes of this subsection) in Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia; and

(b) APRA has not authorised the ADI to hold assets of a lesser value.

Penalty: 200 penalty units.

(4A) For the purposes of subsection (4):

Section 13B

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(b) the assets of the ADI are taken not to include:

(i) any interest in an asset (or a part of an asset) in a cover pool for which the ADI is the issuing ADI; or

(ii) any loan to a covered bond special purpose vehicle that relates to an asset (or a part of an asset) in a cover pool for which the ADI is the issuing ADI.

(5) An offence against subsection (4) is an indictable offence.

(6) If the circumstances relating to the asset holdings of an ADI are such that give rise to the ADI committing an offence against subsection (4), the ADI 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 ADI committing the offence continue (including the day of conviction for any such offence or any later day).

(1) An investigator of the affairs of an ADI under section 13 or 13A is entitled to have access to the books, accounts and documents of the ADI, and to require the ADI to give the investigator information or facilities to conduct the investigation.

(1A) An ADI commits an offence if:

(a) the ADI does not give the investigator access to its books, accounts and documents; or

Section 13BA

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Penalty: 50 penalty units.

(1B) If the ADI does or fails to do an act in circumstances that give rise to the ADI committing an offence against subsection (1A), the ADI 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 ADI committing the offence continue (including the day of conviction for any such offence or any later day).

(1) After the decision that an ADI statutory manager will take control of an ADI’s business is made, APRA must give the ADI written notice that the ADI statutory manager will take, or is taking, control of the business.

Note: Subsections 15A(4) and 16A(3) also require APRA to give notice of the taking of control.

(2) An ADI statutory manager takes control of an ADI’s business:

(a) at the time specified in a notice under this section as the time when the ADI statutory manager takes control of the business (which must not be earlier than the notice is given); or

Section 13C

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(3) A notice under subsection (1) is not a legislative instrument.

(1) If APRA assumes control of an ADI’s business or appoints an administrator of an ADI’s business, APRA must ensure that either it or an administrator of the ADI’s business has control of the ADI’s business until:

(a) the following conditions are satisfied:

(i) the ADI’s deposit liabilities in Australia have been repaid or APRA is satisfied that suitable provision has been made for their repayment; and

(ii) APRA considers that it is no longer necessary for it or an administrator to remain in control of the ADI’s business; or

Note: This provision does not prevent a change, or changes, between control of an ADI’s business by APRA and an administrator or between administrators.

(2) Before making an ultimate termination of control by an ADI statutory manager of an ADI’s business, APRA must:

(a) ensure that directors of the ADI have been appointed or elected under the ADI’s constitution at a meeting called by the ADI statutory manager in accordance with the ADI’s constitution; or

(b) appoint directors of the ADI by instrument in writing; or

Section 13D

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(3) If the requirements in subsections (1) and (2) are satisfied, APRA may by instrument in writing make an ultimate termination of control of an ADI’s business by an ADI statutory manager.

(4) If the ADI statutory manager at the time of the termination is an administrator, the instrument of termination also operates as a termination of the appointment of the administrator. A copy of the instrument must be given to the administrator. However, mere failure to give the copy to the administrator does not affect the termination of the appointment.

(5) If a director is elected or appointed under subsection (2), the director takes office on the termination of the ADI statutory manager’s control of the ADI’s business. If the director was appointed by APRA, the director holds office until the ADI’s next annual general meeting, subject to any terms and conditions imposed by APRA on the director’s appointment. If the director was appointed or elected under the ADI’s constitution, the constitution governs the appointment.

Note: For further information about what happens when an ADI statutory manager is in control of an ADI’s business, see Subdivision B.

This Subdivision applies to an ADI that:

(a) is a company that:

(ii) has a share capital; and

Section 13E

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(a) the ADI informs APRA that:

(i) the ADI considers that the ADI is likely to become unable to meet the ADI’s obligations; or

(ii) the ADI is about to suspend payment; or

(b) APRA considers that, in the absence of external support:

(i) the ADI may become unable to meet the ADI’s obligations; or

(ii) the ADI may suspend payment; or

(iii) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the interests of the ADI’s depositors; or

(iv) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the stability of the financial system in Australia; or

(c) the ADI:

(i) becomes unable to meet the ADI’s obligations; or

(ii) suspends payment.

(a) the direction; or

(b) a class of directions that includes the direction.

(3) The regulations may specify that a particular form of support is not external support for the purposes of paragraph (1)(b).

Section 13F

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) A recapitalisation direction may direct the ADI to issue:

(a) shares, or rights to acquire shares, in the ADI; or

(b) other capital instruments of a kind specified in the direction.

(2) A direction for the purposes of paragraph (1)(a) may specify that the shares or rights must:

(a) be of a kind specified in the direction; or

(b) have the characteristics specified in the direction.

(3) A direction for the purposes of paragraph (1)(b):

(a) must not specify a kind of capital instrument unless that kind of capital instrument is specified in the regulations; and

(b) may specify that the capital instruments must have the characteristics specified in the direction.

(2) The notice must:

(a) identify the issue; and

(b) explain the effect of the issue of the shares, rights to acquire shares, or other capital instruments on the members’ interests.

(3) An ADI may issue shares, rights to acquire shares, or other capital instruments, in compliance with a recapitalisation direction despite:

Section 13H

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) the ADI’s constitution; and

(c) any contract or arrangement to which the ADI is a party; and

(1) APRA must comply with this section before giving a recapitalisation direction that directs an ADI to issue shares, or rights to acquire shares, in the ADI, unless APRA is satisfied that compliance with this section would detrimentally affect:

(a) the depositors with the ADI; or

(b) the stability of the financial system in Australia.

(2) APRA must:

(b) consider the report.

(3) The report must set out:

(a) the amount that is, in the expert’s opinion, the fair value for each of those shares or rights; and

(b) the reasons for forming the opinion; and

(c) any relationship between the expert and:

(i) the ADI; or

Section 13J

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(d) any financial or other interest of the expert that could reasonably be regarded as being capable of affecting the expert’s ability to give an unbiased opinion in relation to the matter being reported on.

(1) In determining the fair value for each share in an ADI for the purposes of paragraph 13H(3)(a), the expert must:

(a) first, assess the value of the ADI as a whole, in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the ADI; and

(b) then, allocate that value among the classes of shares in the ADI that:

(i) have been issued; or

(ii) APRA proposes to direct be issued (taking into account the relative financial risk, and voting and distribution rights, of the classes); and

(c) then, allocate the value of each class pro rata among the shares in that class that:

(i) have been issued; or

(ii) APRA proposes to direct be issued (without allowing a premium or applying a discount for particular shares in that class).

(2) The Minister may give the expert written notice of assumptions for the valuation of the company.

(3) The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions.

(4) A notice given under subsection (2) or (3) is not a legislative instrument.

Section 13L

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of that right.

(2) The Minister may give the expert written notice of assumptions for the valuation of such rights.

(3) The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions.

(4) A notice given under subsection (2) or (3) is not a legislative instrument.

(1) APRA must comply with this section before giving a recapitalisation direction that directs an ADI to issue capital instruments other than shares, or rights to acquire shares, in the ADI.

(2) APRA must comply with any requirements of the regulations relating to ascertaining the fair value of the capital instruments.

(3) Regulations made for the purposes of this section may specify different requirements in relation to different kinds of capital instruments.

A contravention of:

(a) section 13H or subsection 13J(1) or 13K(1); or

(b) section 13L or regulations made for the purposes of that subsection;

Section 13N

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) This section applies if an ADI is party to a contract, whether the proper law of the contract is:

(a) Australian law, including the law of a State or Territory; or

(b) law of a foreign country, including the law of part of a foreign country.

(2) The fact that the ADI is subject to a recapitalisation direction does not allow the contract, or a party to the contract, other than the ADI, to do any of the following:

(a) deny any obligation under the contract;

(b) accelerate any debt under the contract;

(c) close out any transaction relating to the contract;

(d) enforce any security under that contract.

(2) The notice must include:

(a) the name of the ADI that is given the direction; and

(b) a summary of the direction.

Section 13P

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(5) If the Minister or the Reserve Bank requests APRA to provide information about:

(a) any recapitalisation directions in respect of a particular ADI; or

(b) any recapitalisation directions made during a specified period in respect of any ADIs;

APRA must comply with the request.

(6) APRA may provide any information that APRA considers appropriate to the Minister or the Reserve Bank about any recapitalisation directions, or revocations of recapitalisation directions, in respect of any ADI, at any time.

(7) If APRA:

(a) provides the Minister or the Reserve Bank with information about a recapitalisation direction; and

(b) later revokes the direction;

APRA must notify that person of the revocation of the direction as soon as practicable after the revocation.

(8) Failure to notify the person does not affect the validity of the revocation.

Section 13Q

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) An ADI commits an offence if:

(a) the ADI does, or refuses or fails to do, an act; and

(b) doing, or refusing or failing to do, the act results in a contravention of a recapitalisation direction given to the ADI.

Penalty: 50 penalty units.

(2) However, subsection (1) does not apply if:

(a) the ADI made reasonable efforts to comply with the recapitalisation direction; and

(b) the ADI’s contravention is due to circumstances beyond the ADI’s control.

(3) If an ADI does, or refuses or fails to do, an act in circumstances that give rise to the ADI committing an offence against subsection (1), the ADI 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 ADI committing the offence continue (including the day of conviction for any such offence or any later day).

(4) An officer of an ADI commits an offence if:

(a) the officer refuses or fails to take reasonable steps to ensure that the ADI complies with a recapitalisation direction given to the ADI; and

(b) the officer’s duties include ensuring that the ADI complies with the direction, or with a class of directions that includes the direction.

Section 13R

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(5) If an officer of an ADI refuses or fails to take reasonable steps to ensure that the ADI complies with a recapitalisation direction given to the ADI in circumstances that give rise to the officer committing an offence against subsection (4), 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).

(a) the acquisition of shares in an ADI as a direct result of:

(i) the issue of the shares in compliance with a recapitalisation direction given to the ADI; or

(ii) the exercise of a right to acquire shares that was issued in compliance with such a recapitalisation direction;

Section 14A

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) An ADI statutory manager has the powers and functions of the members of the board of directors of the ADI (collectively and individually), including the board’s powers of delegation.

Note: When an ADI statutory manager takes control of the business of an ADI, the directors of the ADI cease to hold office (see section 15).

(2) An ADI statutory manager may, for the purposes of this Division, require a person who has, at any time, been an officer of the ADI to give the ADI statutory manager any information relating to the business of the ADI that the ADI statutory manager requires. A requirement to give information may include a requirement to produce books, accounts or documents.

(2A) A person who is or has been an officer of an ADI commits an offence if:

(a) there is an ADI statutory manager in relation to the ADI; and

(b) under subsection (2), the ADI statutory manager requires the person to give information or to produce books, accounts or documents; and

(c) the person fails to comply with the requirement.

Penalty: Imprisonment for 12 months.

Section 14A

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(3) An individual is not excused from complying with a requirement under subsection (2) to give information on the ground that doing so would tend to incriminate the individual or make the individual liable to a penalty.

(4) If:

(a) before giving information in compliance with a requirement under subsection (2), an individual claims that giving the information might tend to incriminate the individual or make the individual liable to a penalty; and

(b) giving the information might in fact tend to incriminate the individual or make the individual so liable;

the information given in compliance with the requirement is not admissible in evidence against the individual in a criminal proceeding or a proceeding for the imposition of a penalty, other than a proceeding in respect of the falsity of the information.

(4A) Subsections (3) and (4) apply to the production of books, accounts or documents in a corresponding way to the way in which they apply to the giving of information.

(5) An ADI statutory manager may sell or otherwise dispose of the whole or any part of the ADI’s business. The sale or disposal may occur on any terms and conditions that the ADI statutory manager considers appropriate.

Section 14AA

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(a) is necessary or convenient for enabling or facilitating the performance of the ADI statutory manager’s functions and duties, or the exercise of the ADI statutory manager’s other powers, under this Division in relation to the ADI; and

(b) promotes:

(i) the protection of depositors of the ADI; and

(ii) financial system stability in Australia.

(5B) An ADI statutory manager may do an act under subsection (5A) despite:

(b) the ADI’s constitution; and

(c) any contract or arrangement to which the ADI is party; and

(6) In this section:

(a) issue shares, or rights to acquire shares, in the company;

(b) cancel shares, or rights to acquire shares, in the company;

Section 14AB

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(d) sell shares, or rights to acquire shares, in the company;

(e) vary or cancel rights or restrictions attached to shares in a class of shares in the company.

Note: Before doing such an act, the ADI statutory manager will usually need to get and consider a report on the fair value of each share or right concerned: see section 14AB.

(3) One of the acts to which subsection (2) relates is the offering of shares, or rights to acquire shares, in the company for sale under paragraph (1)(d).

(4) An ADI statutory manager may do an act under subsection (1) despite:

(b) the company’s constitution; and

(c) any contract or arrangement to which the company is party; and

Section 14AB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) consider the report;

unless APRA determines under subsection (8) that this subsection does not apply in relation to that act relating to those shares or rights.

(2) The report must set out:

(a) the amount that is, in the expert’s opinion, the fair value for each share or right concerned; and

(b) the reasons for forming the opinion; and

(c) any relationship between the expert and any of the following persons:

(i) the ADI statutory manager;

(iii) the ADI;

including any circumstances in which the expert gives them advice, or acts on their behalf, in the proper performance of the functions attaching to the expert’s professional capacity or business relationship with them; and

Section 14AB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(3) In determining for the purposes of paragraph (2)(a) the amount that is, in the expert’s opinion, the fair value for each share concerned, the expert must:

(a) first, assess the value of the company as a whole, in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the company; and

(b) then allocate that value among the classes of shares in the company that either have been issued or that the ADI statutory manager proposes to issue (taking into account the relative financial risk, and voting and distribution rights, of the classes); and

(c) then allocate the value of each class pro rata among the shares in that class that either have been issued or that the ADI statutory manager proposes to issue (without allowing a premium or applying a discount for particular shares in that class).

(4) The Minister may give the expert written notice of assumptions for the valuation of the company. The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions. A notice under this subsection is not a legislative instrument.

(5) In determining for the purposes of paragraph (2)(a) the amount that is, in the expert’s opinion, the fair value for each right concerned, the expert must act in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the right.

Section 14AC

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

the assumptions. A notice under this subsection is not a legislative instrument.

(7) A contravention of subsection (1), (2), (3), (5) or (9) does not affect the validity of anything done under section 14AA.

(8) APRA may determine in writing that subsection (1) does not apply in relation to an act relating to shares or rights if APRA is satisfied that delaying the act to enable compliance with that subsection in relation to the act would detrimentally affect:

(a) depositors with the ADI concerned; and

(b) financial system stability in Australia.

(9) APRA must:

(b) give a copy of a determination under subsection (8) to the ADI statutory manager concerned (unless that manager is APRA).

(10) A determination made under subsection (8) is not a legislative instrument.

(1) This section applies if an ADI is party to a contract, whether the proper law of the contract is Australian law (including the law of a State or Territory) or law of a foreign country (including the law of part of a foreign country).

(2) The fact that an ADI statutory manager does an act under subsection 14AA(1) relating to the ADI does not allow the contract, or any other party to the contract, to do any of the following:

Section 14AD

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(b) accelerate any debt under that contract;

(c) close out any transaction relating to that contract;

(d) enforce any security under that contract.

(1) APRA may require a person, by written notice given to the person, to give APRA information, or documents containing information, relating to the business of an ADI that has an ADI statutory manager if:

(a) in a case where the ADI statutory manager is APRA:

(i) APRA believes, on reasonable grounds, that the person has such information or documents; and

(ii) APRA requires the information or documents for the purposes of this Division; and

(b) in a case where the ADI statutory manager is not APRA:

(i) the ADI statutory manager requests, in writing, that APRA require the person to give the information or documents under this subsection; and

(ii) APRA believes, on reasonable grounds, that the person has such information or documents; and

(iii) APRA is satisfied that the ADI statutory manager requires the information or documents for the purposes of this Division.

(2) The notice:

(a) must specify a period within which the information or documents must be given to APRA; and

(b) may specify the form and manner in which the information or documents must be given to APRA.

Section 14B

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(4) A person commits an offence if:

(a) APRA requires the person to give APRA information or documents under subsection (1); and

(b) the person refuses or fails to give the information or documents as required.

Penalty: Imprisonment for 12 months or 50 penalty units, or both.

(5) A person is not excused from complying with a requirement under subsection (1) to give information or documents on the ground that doing so would tend to incriminate the individual or make the individual liable to a penalty.

(6) However, in the case of an individual:

(a) the information or document given; and

(b) giving the information or document; and

(c) any information, document or thing obtained as a direct or indirect consequence of giving the information or document;

are not admissible in evidence against the individual in a criminal proceeding or a proceeding for the imposition of a penalty, other than a proceeding in respect of the falsity of the information or document.

(7) This section does not limit section 14A.

Section 14C

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(a) that APRA make a particular direction under Division 1BA or section 29 in respect of the ADI;

(b) if the administrator considers that the ADI is insolvent and could not be restored to solvency within a reasonable period:

(i) that APRA apply under section 14F to the Federal Court of Australia for an order that the ADI be wound up; or

(ii) that APRA revoke the ADI’s section 9 authority.

(2) If an administrator of an ADI’s business makes a recommendation under this section, APRA must consider the recommendation but is not required to act on it.

(1) If an ADI incurs any loss because of any fraud, dishonesty, negligence or wilful failure to comply with this Act by the ADI statutory manager, the ADI statutory manager is liable for the loss.

(2) An ADI statutory manager is not liable for a loss that is not a loss incurred because of fraud, dishonesty, negligence or wilful failure to comply with this Act. If the ADI statutory manager is an administrator of the ADI’s business, the administrator must provide details of the loss in a written report to APRA. However, failure to do so does not make the administrator liable for the loss.

Section 14D

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) A person who is an administrator of an ADI’s business must give to APRA a written report showing how the control of the ADI’s business is being carried out if APRA requests that such a report be provided to it. The report must be given to APRA within a reasonable time after the request.

(2) A person who was an administrator of an ADI’s business must give to APRA a written report showing how the control of the ADI’s business was carried out over the period of the administrator’s appointment if the administrator’s appointment has been terminated. The report must be given to APRA within a reasonable time of the termination.

(3) APRA may give an administrator of an ADI’s business a direction relating to the control of the ADI’s business, and may alter such a direction. If a direction (including an altered direction) is given to an administrator by APRA, the administrator must:

Section 14DAA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) immediately provide to APRA information relating to the control of the ADI’s business and request APRA to alter the direction.

(4) If an administrator of an ADI’s business requests APRA to alter a direction and APRA considers the request then confirms the direction, the administrator must act in accordance with the direction.

(1) If an administrator of an ADI’s business has reasonable cause to believe that an action that the administrator proposes to take is an action that is likely to have a detrimental effect on financial system stability in Australia, the administrator must:

(a) notify APRA as soon as practicable; and

(b) obtain APRA’s written consent before taking the action.

(2) The administrator is not required to comply with subsection (1) if the administrator is satisfied that it is not reasonably practicable to do so, having regard to urgency or other similar constraint.

(3) The performance of a function or the exercise of a power by an administrator is not invalid merely because of a failure by the administrator to comply with this section.

(1) If an administrator of an ADI’s business has reasonable cause to believe that an action that the administrator proposes to take is an action that is likely to have a detrimental effect on financial system stability in New Zealand, the administrator must:

(a) notify APRA as soon as practicable; and

Section 14E

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(2) The administrator is not required to comply with subsection (1) if the administrator is satisfied that it is not reasonably practicable to do so, having regard to urgency or other similar constraint.

(3) The performance of a function or the exercise of a power by an administrator is not invalid merely because of a failure by the administrator to comply with this section.

(4) If APRA receives a notice under paragraph (1)(a), it must provide details of the notice to every prescribed New Zealand authority that APRA considers to be relevant in the circumstances before granting written consent to the administrator.

(5) APRA is not required to comply with subsection (4) if APRA is satisfied that it is not reasonably practicable to do so, having regard to urgency or other similar constraint.

(6) The performance of a function or the exercise of a power by APRA is not invalid merely because of a failure by APRA to comply with this section.

(7) An administrator of an ADI’s business may consult a prescribed New Zealand authority about whether an action the administrator proposes to take is likely to have a detrimental effect on financial system stability in New Zealand.

(1) If an administrator of an ADI’s business contravenes a requirement of this Division, APRA may terminate the administrator’s appointment.

(2) The terms and conditions of the administrator’s appointment may provide for termination in circumstances in addition to those mentioned in subsection (1).

Section 14F

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) APRA may apply to the Federal Court of Australia for an order that an ADI be wound up if:

(a) an ADI statutory manager is in control of the ADI’s business; and

(b) APRA considers that the ADI is insolvent and could not be restored to solvency within a reasonable period.

(3) If APRA makes an application under subsection (1), APRA must inform the Minister of the application as soon as possible.

Note: Once informed, the Minister may choose to apply Subdivision C of Division 2AA in relation to the ADI so some depositors can receive payments earlier than they would in the winding up of the ADI.

(1) The directors of an ADI cease to hold office when an ADI statutory manager takes control of the ADI’s business.

(2) A director of an ADI must not be appointed or elected while an ADI statutory manager is in control of the ADI’s business unless the appointment is made under subsection 13C(2).

Section 15A

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1) The appointment of an external administrator of an ADI is terminated when an ADI statutory manager takes control of the ADI’s business.

(2) An external administrator of an ADI must not be appointed while an ADI statutory manager is in control of the ADI’s business unless APRA approves the appointment.

(3) If a person who ceased to be the external administrator of an ADI under subsection (1), or a purported external administrator of the ADI appointed in contravention of subsection (2), purports to act in relation to the ADI’s business while an ADI statutory manager has control of the ADI’s business, those acts are invalid and of no effect.

(4) APRA must inform the external administrator of an ADI that an ADI statutory manager will take control of the ADI’s business as soon as possible after the decision that an ADI statutory manager will take control of the ADI’s business is made. However, failure to inform the external administrator does not affect the operation of this section.

(1) A person cannot begin or continue a proceeding in a court against an ADI while an ADI statutory manager is in control of the ADI’s business unless:

(a) the court grants leave on the ground that the person would be caused hardship if leave were not granted; or

Section 15C

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(1A) Subsection (1) does not apply to a proceeding in respect of an offence or a contravention of a provision of a law for which a pecuniary penalty (however described) may be imposed.

(2) A person intending to apply for leave of the court under paragraph (1)(a) must give APRA at least 10 days notice of the intention to apply. APRA may apply to the court to be joined as a party to the proceedings for leave.

(3) In this section, a reference to a proceeding against an ADI includes a reference to a cross-claim or third party claim against an ADI.

(1) This section applies if an ADI is party to a contract, whether the proper law of the contract is Australian law (including the law of a State or Territory) or law of a foreign country (including the law of part of a foreign country).

(2) The fact that an ADI statutory manager is in control of the ADI’s business does not allow the contract, or a party to the contract, to do any of the following:

(a) deny any obligations under that contract;

(b) accelerate any debt under that contract;

(c) close out any transaction relating to that contract;

(d) enforce any security under that contract.

This subsection has effect subject to section 31B.

Neither the appointment of an administrator of an ADI’s business under this Division nor the fact that an ADI statutory manager is in control of an ADI’s business under this Division affects:

Section 16

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(b) the obligation of the ADI to comply with those other provisions and that Act.

(1) APRA’s costs (including costs in the nature of remuneration and expenses) of being in control of an ADI’s business, or of having an administrator in control of an ADI’s business, are payable from the ADI’s funds and are a debt due to APRA.

(2) Despite anything contained in any law relating to the winding-up of companies, but subject to subsection 13A(3), debts due to APRA by an ADI under subsection (1) have priority in a winding-up of the ADI over all other unsecured debts.

(1) If the Treasurer requests APRA to give him or her a written report concerning the activities of ADI statutory managers in respect of specified ADIs or in respect of a specified period, APRA must give the Treasurer such a written report within a reasonable time after the Treasurer requests it.

(2) If an ADI statutory manager takes control of an ADI’s business during a financial year, or if there is an ultimate termination of control during a financial year, APRA must give the Treasurer a written report within a reasonable time after the end of the financial year concerning activities of all ADI statutory managers and each ultimate termination of control that occurred during that financial year.

(3) If APRA:

(a) takes control of an ADI’s business; or

Section 16AA

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

(c) makes an ultimate termination of control in respect of an ADI’s business;

(a) the acquisition of assets in a sale or disposal of the whole or part of the business of an ADI under this Division by an ADI statutory manager in control of the ADI’s business (whether the assets are shares in another body corporate or other assets);

(b) the acquisition of shares in an ADI as a direct result of:

(i) the issue or sale of the shares under this Division by an ADI statutory manager in control of the ADI’s business; or

Section 16AB

Compilation No. 48 Compilation date: 1/7/16 Registered: 7/7/16

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

(c) substitutes APRA for those account-holders as a creditor of the declared ADI to the extent of the entitlements.

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

(c) meeting APRA’s other obligations under this Division and the regulations made for the purposes of this Division.

(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.

Section 16AD

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(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.

(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.

(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.

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

Section 16AE

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(b) has effect according to its terms.

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

(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.

(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:

Section 16AG

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(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.

(1A) The interest is payable at:

(a) the rate of interest that is payable according to the terms and conditions of the protected account; or

(b) if APRA considers that that rate is not certain—the rate of interest that APRA declares, in writing, is payable.

(1B) A declaration under paragraph (1A)(b) is not a legislative instrument.

(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.

(3) If:

(a) one person holds the protected account mentioned in subsection (1); and

(b) the person is the trustee of 2 or more trusts; and

(c) the net credit balance of the account consists of the trust funds of 2 or more of those trusts;

Section 16AG

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(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).

(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.

Section 16AH

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(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.

(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.

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Section 16AHA

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(a) APRA;

(b) the Reserve Bank.

(1) This section applies if one or more amounts are paid to, or applied for the benefit of, one or more account-holders in a financial year to meet (wholly or partly) the account-holders’ entitlements under this Subdivision.

(2) Within 14 days after the end of the financial year, APRA must give each of those account-holders a statement about the amounts paid to, or applied for the benefit of, the account-holder in the financial year. The statement must:

(a) be in the approved form; and

(b) name the account-holder; and

(c) state the account-holder’s tax file number, if APRA knows it; and

Section 16AI

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(3) Within 4 months after the end of the financial year, APRA must give the Commissioner a report in the approved form about all the amounts described in subsection (1).

Note: That Division sets out rules about approved forms and when they can be given.

(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).

Section 16AJ

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(1) 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 appointed in connection with the winding up, or proposed winding up, of an ADI.

(2) Without limiting subsection (1), APRA may require a liquidator to assist APRA in APRA’s function of paying account holders their entitlements under Subdivision C.

(3) For example, APRA may, by notice issued under subsection (1), require the liquidator to do the things specified in the notice, including:

(a) carrying on the business of the ADI so far as necessary, or doing any other act or thing, to facilitate APRA’s payment to account holders in accordance with Subdivision C; or

(c) transferring the entitlements of account holders to accounts held by the account holders in another ADI.

(5) However, the liquidator is not required to comply with a notice issued under subsection (1) unless there is sufficient available

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Section 16AK

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property to meet the liquidator’s costs likely to be incurred in complying with the notice in full, unless APRA indemnifies the liquidator for those costs.

(6) The liquidator has the powers that are necessary or convenient to comply with a notice issued under subsection (1).

(8) A reference in this section to a liquidator’s costs includes:

(a) remuneration, or fees for services, payable to the liquidator for complying with a notice issued under subsection (1); and

(b) expenses incurred by the liquidator in complying with a notice issued under subsection (1).

(9) A reference in this section to a liquidator includes a reference to a provisional liquidator.

(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.

Section 16AK

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(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);

(c) an APRA staff member 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);

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;

(c) determining the amount of 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;

(ea) preparing or giving a statement or report required by section 16AHA;

(eb) complying with an obligation under a law relating to taxation;

Section 16AL

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(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.

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

Civil penalty: 10,000 penalty units.

(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.

Section 16AM

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(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.

(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).

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

The regulations may make provision for and in relation to the recovery by APRA of the excess of an amount paid to, or applied

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Section 16AN

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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.

(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.

(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.

(1) The costs incurred by APRA in relation to the exercise of its powers and the performance of its functions under this Division 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.

Section 16AP

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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

(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.

Section 16AR

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(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.

(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.

Section 16AT

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(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.

Section 16AU

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(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;

Section 16AV

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(1) This section applies if the prudential standards require an auditor to be appointed.

(2) The appointed auditor must perform the functions and duties of an auditor that are set out in the prudential standards.

(3) The appointed auditor must comply with the prudential standards in performing the functions and duties.

(4) The ADI or authorised NOHC to whom the prudential standards apply must make any arrangements that are necessary to enable the appointed auditor to perform the functions and duties.

(1) APRA may, by notice in writing, require a person who is, or has been, an auditor of:

(a) an ADI; or

(b) an authorised NOHC; or

(c) a subsidiary of an ADI or authorised NOHC; or

(d) if an ADI is a subsidiary of a foreign corporation (whether or not the ADI is itself a foreign ADI):

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Section 16BA

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subsidiary that is not incorporated in Australia and carries on business in Australia;

to provide information, or to produce books, accounts or documents, to APRA about the ADI, authorised NOHC, subsidiary of the ADI or authorised NOHC, or relevant Australian-incorporated subsidiary, or about the Australian operations of the relevant foreign-incorporated subsidiary, if APRA considers that the provision of the information, or the production of the books, accounts or documents, will assist APRA in performing its functions under this Act.

(1A) A person commits an offence if:

(a) under subsection (1), APRA requires the person to provide information or to produce books, accounts or documents; and

(b) the person fails to comply with the requirement.

Penalty: Imprisonment for 6 months.

(1) This section applies to a person who is or has been an auditor of a body corporate that is:

(a) an ADI; or

(b) an authorised NOHC; or

Section 16BA

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(d) if an ADI is a subsidiary of a foreign corporation (whether or not the ADI is itself a foreign ADI):

(2) If the person has reasonable grounds for believing that:

(a) the body corporate is insolvent or there is a significant risk that the body corporate will become insolvent; or

(b) an existing or proposed state of affairs may materially prejudice the interests of:

(i) if the body corporate is an ADI or a subsidiary of an ADI—the depositors of the ADI; or

(ii) if the body corporate is an authorised NOHC or a subsidiary of an authorised NOHC—the depositors of any ADI that is a subsidiary of the authorised NOHC; or

(iii) if the body corporate is a relevant Australian-incorporated subsidiary or a relevant foreign-incorporated subsidiary of a foreign corporation—the depositors of any ADI that is a subsidiary of the foreign corporation;

the person must immediately notify APRA in writing of the matter.

(3) A person commits an offence if the person contravenes subsection (2).

Section 16BA

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(4) A person commits an offence if the person contravenes subsection (2). This is an offence of strict liability.

Penalty: 60 penalty units.

(5) Subsections (3) and (4) do not apply to a person in relation to a matter referred to in subsection (2) if:

(a) the person becomes aware of the matter because the person is informed of it by a director or senior manager of the body corporate; and

(b) the director or senior manager informs the person that the body corporate has notified APRA in writing of the matter; and

(c) the person has no reason to disbelieve the director or senior manager.

(6) If the person has reasonable grounds for believing that:

(a) the body corporate has failed or will fail to comply with:

(ii) if the body corporate is an ADI or authorised NOHC—a prudential standard; or

(iii) if the body corporate is an ADI or authorised NOHC—a direction under Division 1BA of Part II or section 29; or

(iv) if the body corporate is an ADI—a condition of the body corporate’s section 9 authority; or

(v) if the body corporate is an authorised NOHC—a condition of the body corporate’s NOHC authority; and

Section 16BA

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the person must give APRA a written report about the failure as soon as practicable, and in any event no later than 10 business days.

(a) the number or frequency of similar failures;

(b) the impact the failure has or will have on the body corporate’s ability to conduct its business;

(c) the extent to which the failure indicates that the body corporate’s arrangements to ensure compliance with this Act, the prudential standards or the regulations might be inadequate;

(d) the actual or potential financial loss arising or that will arise from the failure:

(i) if the body corporate is an ADI—to the depositors of the body corporate; or

(ii) to the body corporate;

(e) any matters prescribed by the regulations for the purposes of this paragraph.

(8) A person commits an offence if the person contravenes subsection (6).

Penalty: Imprisonment for 6 months.

(9) A person commits an offence if the person contravenes subsection (6). This is an offence of strict liability.

Penalty: 60 penalty units.

Section 16C

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(10) Subsections (8) and (9) do not apply to a person in relation to a failure to comply referred to in subsection (6) if:

(a) a director or senior manager of the body corporate informs the person that the body corporate has informed APRA in writing of the failure; and

(b) the person has no reason to disbelieve the director or senior manager.

(11) A person commits an offence if:

(a) the person is a director or senior manager of a body corporate referred to in subsection (1); and

(b) the person knows that there are reasonable grounds for believing a thing referred to in subsection (2) or (6); and

(c) the person informs an auditor of the body corporate that the body corporate has informed APRA in writing of the thing; and

(d) the body corporate has not done so.

Penalty: Imprisonment for 12 months.

A person who is, or has been, an auditor of:

(a) an ADI; or

(b) an authorised NOHC; or

(c) a subsidiary of an ADI or authorised NOHC; or

(d) if an ADI is a subsidiary of a foreign corporation (whether or not the ADI is itself a foreign ADI):

Section 16D

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mentioned in paragraph (a), (b) or (c)), being a subsidiary that is incorporated in Australia; or

(1) If an appointed auditor of an ADI or authorised NOHC is aware of circumstances that amount to:

(a) an attempt by any person to unduly influence, coerce, manipulate or mislead the appointed auditor in connection with the performance of the appointed auditor’s functions or duties; or

(b) an attempt by any person to otherwise interfere with the performance of the appointed auditor’s functions or duties;

the appointed auditor must notify APRA in writing of those circumstances as soon as practicable, and in any case within 28 days, after the appointed auditor becomes aware of those circumstances.

(2) An appointed auditor commits an offence if the appointed auditor contravenes subsection (1).

Section 16E

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(1) A person commits an offence if:

(a) the person is an employee or officer of a body corporate that is an ADI or authorised NOHC; and

(b) the person gives information, or allows information to be given, to an auditor of the body corporate; and

(c) the information relates to the affairs of the body corporate; and

(d) the person knows that the information:

(i) is false or misleading in a material particular; or

(ii) is missing something that makes the information misleading in a material respect.

Penalty: Imprisonment for 5 years or 200 penalty units, or both.

(2) A person commits an offence if:

(a) the person is an employee or officer of a body corporate that is an ADI or authorised NOHC; and

(b) the person gives information, or allows information to be given, to an auditor of the body corporate; and

(c) the information relates to the affairs of the body corporate; and

(d) the information:

(i) is false or misleading in a material particular; or

(ii) is missing something that makes the information misleading in a material respect; and

(e) the person did not take reasonable steps to ensure that the information:

(i) was not false or misleading in a material particular; or

Section 16E

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Penalty: Imprisonment for 2 years or 100 penalty units, or both.

Section 17

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(1) This section applies to a person who is an appointed auditor of an ADI.

(2) APRA may direct (in writing) that an ADI remove the person from the position if APRA is satisfied that the person:

(a) has failed to perform adequately and properly the functions and duties of the position as required under this Act or the prudential standards; or

(b) does not meet one or more of the criteria for fitness and propriety set out in the prudential standards; or

(c) either:

(i) for a person who is a disqualified person only because he or she was disqualified under section 21—is disqualified from being or acting as an auditor of the ADI; or

(ii) otherwise—is a disqualified person.

(3) Before directing an ADI to remove a person, APRA must give written notice to:

(a) the person; and

(b) the ADI;

giving each of them a reasonable opportunity to make submissions on the matter.

(4) If a submission is made to APRA in response to the notice, APRA must have regard to the submission and may discuss any matter contained in the submission with such persons as it considers appropriate for the purpose of assessing the truth of the matter.

Section 18

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(6) A direction takes effect on the day specified in it, which must be not earlier than 7 days after it is made.

(7) If APRA directs an ADI to remove a person, APRA must give a copy of the direction to the person and to the ADI.

(7A) An ADI must comply with a direction under this section.

Note: For enforcement of the direction, see section 11CG.

(7B) The power of an ADI to comply with a direction under this section may be exercised by giving a written notice to the person who is the subject of the direction.

(7C) Subsection (7B) does not, by implication, limit any other powers of an ADI to remove a person.

(8) Part VI applies to a direction given by APRA under this section.

(1) If APRA is of the opinion that an auditor of a relevant body corporate (see subsection (2)):

(a) has failed, whether within or outside Australia, to perform adequately and properly his or her duties or functions as an auditor under:

(i) this Act, the regulations or the prudential standards; or

(ii) any other law of the Commonwealth, a State or a Territory; or

(b) is otherwise not a fit and proper person to be the auditor of a relevant body corporate;

APRA may refer the details of the matter to either or both of the following:

Section 18

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taking any disciplinary or other action concerning the matter against the auditor.

(a) an ADI;

(b) an authorised NOHC;

(c) a subsidiary of an ADI or authorised NOHC;

(d) if an ADI is a subsidiary of a foreign corporation (whether or not the ADI is itself a foreign corporation)—a subsidiary of that foreign corporation that is incorporated in, or carries on business in, Australia.

Section 18A

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(1) APRA may accept a written undertaking given by a person in connection with a matter in relation to which APRA has a power or function under this Act.

(2) The person may, with APRA’s consent, vary or withdraw the undertaking.

(3) If APRA considers that a person who has given an undertaking has breached any of the terms of the undertaking, APRA may apply to the Federal Court of Australia for an order under subsection (4).

(4) If the Federal Court is satisfied that a person who has given an undertaking has breached any of the terms of the undertaking, the Court may make any or all of the following orders:

(a) an order directing the person to comply with the undertaking;

(b) an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person obtained (whether directly or indirectly) and that is reasonably attributable to the breach;

(c) any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

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(1) A person commits an offence if:

(a) the person is a disqualified person; and

(b) the person is or acts as one of the following:

(i) a director or senior manager of an ADI (other than a foreign ADI);

(ii) a senior manager of the Australian operations of a foreign ADI;

(iii) a director or senior manager of an authorised NOHC;

(iv) an auditor of an ADI or an authorised NOHC; and

(c) for a person who is a disqualified person only because he or she was disqualified under section 21—the person is disqualified from being or acting as that director, senior manager or auditor (as the case requires).

Penalty: Imprisonment for 2 years.

(2) A person commits an offence if:

(a) the person is a disqualified person; and

(b) the person is or acts as one of the following:

(i) a director or senior manager of an ADI (other than a foreign ADI);

(ii) a senior manager of the Australian operations of a foreign ADI;

(iii) a director or senior manager of an authorised NOHC;

(iv) an auditor of an ADI or an authorised NOHC; and

(c) for a person who is a disqualified person only because he or she was disqualified under section 21—the person is disqualified from being or acting as that director, senior manager or auditor (as the case requires).

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(3) An offence against subsection (2) is an offence of strict liability.

(4) A body corporate commits an offence if:

(a) a person is a disqualified person; and

(b) the person is or acts as one of the following:

(i) if the body corporate is an ADI (other than a foreign ADI)—a director or senior manager of the body corporate;

(ii) if the body corporate is a foreign ADI—a senior manager of the Australian operations of the body corporate;

(iii) if the body corporate is an authorised NOHC—a director or senior manager of the body corporate;

(iv) if the body corporate is an ADI or an authorised NOHC—an auditor of the body corporate; and

(c) for a person who is a disqualified person only because he or she was disqualified under section 21—the person is disqualified from being or acting as that director, senior manager or auditor (as the case requires); and

(d) in any case—the body corporate allows the person to be or act as a director, senior manager or auditor (as the case requires).

Penalty: 250 penalty units.

(5) A body corporate commits an offence if:

(a) a person is a disqualified person; and

(b) the person is or acts as one of the following:

(i) if the body corporate is an ADI (other than a foreign ADI)—a director or senior manager of the body corporate;

(ii) if the body corporate is a foreign ADI—a senior manager of the Australian operations of the body corporate;

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(iv) if the body corporate is an ADI or an authorised NOHC—an auditor of the body corporate; and

(c) for a person who is a disqualified person only because he or she was disqualified under section 21—the person is disqualified from being or acting as that director, senior manager or auditor (as the case requires); and

(d) in any case—the body corporate allows the person to be or act as a director, senior manager or auditor (as the case requires).

Penalty: 60 penalty units.

(6) An offence against subsection (5) is an offence of strict liability.

(8) A failure to comply with this section does not affect the validity of an appointment or transaction.

(9) Subsections (1) to (8) have no effect until the end of the 3-month period that begins at the commencement of this section.

(a) the person has been convicted of an offence against or arising out of:

(i) this Act; or

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conduct, or to conduct relating to a company that carries on business in the financial sector; or

(c) the person has been or becomes bankrupt; or

(d) the person has applied to take the benefit of a law for the relief of bankrupt or insolvent debtors; or

(e) the person has compounded with his or her creditors; or

(f) the Federal Court of Australia has disqualified the person under section 21; or

(g) the person has been disqualified under the law of a foreign country from managing, or taking part in the management of, an entity that carries on the business of banking or insurance or otherwise deals in financial matters.

Note: The Federal Court of Australia may determine that a person is not a disqualified person (see section 22).

(2) A reference in subsection (1) to a person who has been convicted of an offence includes a reference to a person in respect of whom an order has been made relating to the offence under:

(b) a corresponding provision of a law of a State, a Territory or a foreign country.

(1) On application by APRA, the Federal Court of Australia may, by order, disqualify a person from being or acting as a person referred to in subsection (2), for a period that the Court considers appropriate, if the Court is satisfied that:

(a) the person is not a fit and proper person to be or act as such a person; and

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(2) For the purposes of subsection (1), the Court may disqualify a person from being or acting as one or more of the following:

(a) a director or senior manager of:

(i) a particular ADI; or

(ii) a class of ADIs; or

(iii) any ADI;

(other than a particular foreign ADI, a class of foreign ADIs or any foreign ADI);

(b) a senior manager of the Australian operations of:

(i) a particular foreign ADI; or

(ii) a class of foreign ADIs; or

(iii) any foreign ADI;

(c) a director or senior manager of:

(i) a particular authorised NOHC; or

(ii) a class of authorised NOHCs; or

(iii) any authorised NOHC;

(d) an auditor of:

(i) a particular ADI or a particular authorised NOHC; or

(ii) a class of ADIs or a class of authorised NOHCs; or

(iii) any ADI or any authorised NOHC.

(3) In deciding whether it is satisfied as mentioned in paragraph (1)(a), the Court may take into account:

(a) any matters specified in the regulations for the purposes of this paragraph; and

(b) any criteria for fitness and propriety set out in the prudential standards; and

(c) any other matters the Court considers relevant.

(4) In deciding whether the disqualification is justified as mentioned in paragraph (1)(b), the Court may have regard to:

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(b) if the application is for the person to be disqualified from being or acting as an auditor—the person’s conduct in relation to the functions or duties of the person as required under this Act and the prudential standards; and

(c) in any case—any other matters the Court considers relevant.

(5) As soon as practicable after the Court disqualifies a person under this section, APRA must cause particulars of the disqualification:

(a) to be given:

(i) if the person is, or is acting as, a person referred to in subparagraph (2)(a)(i)—to the ADI concerned; or

(ii) if the person is, or is acting as, a person referred to in subparagraph (2)(b)(i)—to the foreign ADI concerned; or

(iii) if the person is, or is acting as, a person referred to in subparagraph (2)(c)(i)—to the authorised NOHC concerned; or

(iv) if the person is, or is acting as, a person referred to in subparagraph (2)(d)(i)—to the ADI or authorised NOHC concerned; and

(1) A disqualified person, or APRA, may apply to the Federal Court of Australia for:

(a) if the person is a disqualified person only because he or she was disqualified under section 21—a variation or a revocation of the order made under that section; or

(b) otherwise—an order that the person is not a disqualified person.

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(a) if the disqualified person makes the application—by the person with APRA; or

(b) if APRA makes the application—by APRA with the disqualified person.

(4) An order under paragraph (1)(b) may be expressed to be subject to exceptions and conditions determined by the Court.

(1) In the case of any proceeding under, or arising out of, this Act, a person is not entitled to refuse or fail to comply with a requirement:

(a) to answer a question or give information; or

(b) to produce books, accounts or other documents; or

(c) to do any other act;

on the ground that the answer or information, production of the book or other thing, or doing that other act, as the case may be, might tend to make the person liable to a penalty by way of a disqualification under section 21.

(2) Subsection (1) applies whether or not the person is a defendant in, or a party to, the proceeding or any other proceeding.

(3) A person is not entitled to refuse or fail to comply with a requirement under this Act:

(a) to answer a question or give information; or

(b) to produce books, accounts or other documents; or

(c) to do any other act;

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(4) Subsections 14A(4), 14AD(6) and 52F(2) do not apply to a proceeding for the imposition of a penalty by way of a disqualification under section 21.

(5) Subsections (1) and (3) of this section have effect despite anything in:

(a) clause 5 of Schedule 2; or

(b) any other provision of this Act; or

(6) In this section:

(1) This section applies to a person who is:

(a) a director or senior manager of an ADI (other than a foreign ADI); or

(b) a senior manager of the Australian operations of a foreign ADI; or

(c) a director or senior manager of an authorised NOHC.

(2) APRA may direct (in writing) that the ADI or authorised NOHC remove the person from the position if APRA is satisfied that the person:

(a) either:

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(ii) otherwise—is a disqualified person; or

(b) does not meet one or more of the criteria for fitness and propriety set out in the prudential standards.

(3) Before directing an ADI or authorised NOHC to remove a person, APRA must give written notice to:

(a) the person; and

(b) the ADI or NOHC;

giving each of them a reasonable opportunity to make submissions on the matter.

(4) If a submission is made to APRA in response to the notice, APRA must have regard to the submission and may discuss any matter contained in the submission with such persons as it considers appropriate for the purpose of assessing the truth of the matter.

(5) A notice given under subsection (3) to a person, an ADI or an authorised NOHC must state that any submissions made in response to the notice may be discussed by APRA with other persons as mentioned in subsection (4).

(6) A direction takes effect on the day specified in it, which must be not earlier than 7 days after it is signed.

(7) If APRA directs an ADI or authorised NOHC to remove a person, APRA must give a copy of the direction to the person and to the ADI or NOHC.

(7A) An ADI or authorised NOHC must comply with a direction under this section.

Note: For enforcement of the direction, see section 11CG.

(7B) The power of an ADI to comply with a direction under this section may be exercised on behalf of the ADI as set out in the table:

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1

The chair of the board of directors of the ADI

by signing a written notice.

2

A majority of the directors of the ADI (excluding any director who is the subject of the direction)

by jointly signing a written notice.

(7C) The power of an authorised NOHC to comply with a direction under this section may be exercised on behalf of the NOHC as set out in the table:

1

The chair of the board of directors of the NOHC

by signing a written notice.

2

A majority of the directors of the NOHC (excluding any director who is the subject of the direction)

by jointly signing a written notice.

(7D) Subsections (7B) and (7C) do not, by implication, limit any other powers of an ADI or authorised NOHC to remove a person.

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This Division provides for the issue of covered bonds by ADIs.

An ADI issuing covered bonds must provide assets to secure the covered bonds and related liabilities. These assets are held by a covered bond special purpose vehicle. Some of the assets held by the covered bond special purpose vehicle form the cover pool for the covered bonds.

The ADI must not issue covered bonds if the combined value of assets in cover pools securing covered bonds issued by the ADI would exceed 8%, or such other percentage as is prescribed by the regulations, of the value of the ADI’s assets in Australia.

This Division does not apply in relation to:

(a) a foreign ADI; or

(b) a bond, note or other debenture, liabilities in relation to which are secured wholly by assets that are not in Australia.

(a) recoverable from the ADI; and

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(2) The purposes of the covered bond special purpose vehicle must relate only to the covered bonds.

Note 1: The value of the cover pool will usually exceed the value of the liabilities to the holders or representatives.

Note 2: Assets in cover pools may change from time to time.

(a) the cover pool; and

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(2) The regulations may prescribe other arrangements that may be entered into by 2 or more ADIs for the purposes of issuing or dealing with covered bonds.

An ADI must not issue a covered bond if the combined value of assets in cover pools securing covered bonds issued by the ADI would exceed 8%, or such other percentage as is prescribed by the regulations, of the value of the ADI’s assets in Australia.

(1) APRA may direct an ADI not to issue a covered bond.

(2) APRA may, by written notice given to the ADI, give the ADI such a direction if:

(a) APRA has reason to believe that the ADI has contravened:

(i) this Division; or

(ii) another provision of this Act, a prudential requirement regulation or a prudential standard relating to covered bonds; or

(b) APRA has given the ADI a direction under section 11CA.

(3) A notice under subsection (2) is not a legislative instrument.

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(5) The ADI has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.

(6) APRA may, by notice in writing to the ADI, vary the direction if, at the time of the variation, it considers that the variation is necessary and appropriate.

(7) The direction has effect until APRA revokes it by notice in writing to the ADI. APRA may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.

(8) Part VI applies to a decision to give a direction under subsection (1).

(10) This section does not limit any other powers of APRA to give directions.

(1) Each cover pool must have a cover pool monitor.

(2) The cover pool monitor must:

(b) hold an Australian financial services licence under that Act that covers the provision of financial services as the cover pool monitor; or

(c) be exempt under that Act from holding an Australian financial services licence for the provision of financial services as the cover pool monitor.

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(a) the issuing ADI for the cover pool; or

(4) The functions of the cover pool monitor are as follows:

(a) to assess the keeping, by the issuing ADI or covered bond special purpose vehicle concerned, of an accurate register of the assets in the cover pool;

(b) to assess compliance by the issuing ADI with sections 31 and 31A;

(c) to make reports relating to the matters in paragraphs (a) and (b) available to the issuing ADI (or any substituted entity) for distribution to the holders of covered bonds or their representatives;

(d) to provide reports relating to the cover pool to APRA on written request by APRA;

(e) such functions (if any) as are prescribed by the regulations.

(5) Copies of reports provided under paragraph (4)(d) must be provided to the issuing ADI (or any substituted entity) and the covered bond special purpose vehicle concerned.

(6) The functions covered by paragraphs (4)(a) to (c) must be performed at least every 6 months.

(1) An asset in a cover pool must be one of the following:

(a) an at call deposit held with an ADI and convertible into cash within 2 business days;

(b) a bank accepted bill or certificate of deposit that:

(i) matures within 100 days; and

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(iii) was not issued by the ADI that issued the covered bonds secured by the assets in the cover pool;

(c) a bond, note, debenture or other instrument issued or guaranteed by the Commonwealth, a State or a Territory;

(d) a loan secured by a mortgage, charge or other security interest over residential property in Australia;

(e) a loan secured by a mortgage, charge or other security interest over commercial property in Australia;

(f) a mortgage insurance policy or other asset related to a loan covered by paragraph (d) or (e);

(g) a contractual right relating to the holding or management of another asset in the cover pool;

(h) a derivative held for one or more of the following purposes:

(i) to protect the value of another asset in the cover pool;

(ii) to hedge risks in relation to another asset in the cover pool;

(iii) to hedge risks in relation to liabilities secured by the assets in the cover pool;

(i) an asset of a kind prescribed by the regulations for the purposes of this paragraph.

(2) Paragraph (1)(i) is not limited by paragraphs (1)(a) to (h).

(3) Despite subsection (1), a cover pool must not contain an asset of a kind prescribed by the regulations for the purposes of this subsection.

(1) The value of assets in a cover pool must be at least 103%, or such other percentage as is prescribed by the regulations, of the face value of the covered bonds secured by the assets.

Note: An exception to this rule is set out in subsection (5).

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Note: An exception to this rule is set out in subsection (6).

(3) For the purposes of subsection (1), if the sum of:

(a) the outstanding principal amount of a loan secured by a residential property; and

(b) the outstanding principal amounts of any prior or equal ranking loans secured by the property;

exceeds 80%, or such other percentage as is prescribed by the regulations, of the value of the property (as determined by the most recent valuation of the property), then the value of the loan is reduced by the amount of the excess.

(4) For the purposes of subsection (1), if the sum of:

(a) the outstanding principal amount of a loan secured by a commercial property; and

(b) the outstanding principal amounts of any prior or equal ranking loans secured by the property;

exceeds 60%, or such other percentage as is prescribed by the regulations, of the value of the property (as determined by the most recent valuation of the property), then the value of the loan is reduced by the amount of the excess.

(5) Subsection (1) does not apply to the extent that compliance would be inconsistent with a direction given by APRA.

(6) Subsection (2) does not apply to the extent that compliance would be inconsistent with the need to deal with an asset to satisfy a call on security in relation to a covered bond.

(1) Subsection 11CD(1A) (direction not grounds for denial of obligations) does not prevent the exercise of a contractual right in relation to an asset that secures liabilities to holders of covered

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bonds, or their representatives, if payments under the covered bonds to the holders or representatives are not made.

(2) Section 15C (ADI statutory manager being in control not grounds for denial of obligations) does not prevent the exercise of a contractual right in relation to an asset that secures liabilities to holders of covered bonds, or their representatives, if payments under the covered bonds to the holders or representatives are not made.