Financial Sector Legislation Amendment Act (No. 1) 2003 (116 of 2003)

Schedule 2   Banking Act 1959

17   After Division 2A of Part II

Insert:

Division 2B - Removal of auditors of ADIs

17 APRA may remove an auditor of an ADI

(1) This section applies to a person who is an 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.

(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.

(5) A notice given under subsection (3) to a person or an ADI 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 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.

18 Referring matters to the professional associations for auditors

(1) This section applies if APRA directs an ADI under section 17 to remove a person from the position of auditor of the ADI.

(2) APRA may refer details of the matter to the following:

(a) the Companies Auditors and Liquidators Disciplinary Board established by Division 1 of Part 11 of the Australian Securities and Investments Commission Act 2001;

(b) those members of the professional association of the auditor who APRA believes will be involved in considering or taking any disciplinary or other action concerning the matter against the auditor.

(3) When APRA refers details of a matter, APRA must also give written notice of the referral (including the nature of the matter) to the auditor.

Division 3 - Governance

19 Disqualified persons must not act for ADIs or authorised NOHCs

(1) A disqualified person commits an offence if the person is or acts as:

(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.

Maximum penalty: Imprisonment for 2 years.

(2) A disqualified person commits an offence if the person is or acts as:

(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.

Maximum penalty: 60 penalty units.

(3) An offence against subsection (2) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code.

(4) A body corporate commits an offence if it allows a disqualified person to be or act as:

(a) if the body corporate is an ADI (other than a foreign ADI) - a director or senior manager of the ADI; or

(b) if the body corporate is a foreign ADI - a senior manager of the Australian operations of the ADI; or

(c) if the body corporate is an authorised NOHC - a director or senior manager of the NOHC.

Maximum penalty: 250 penalty units.

(5) A body corporate commits an offence if it allows a disqualified person to be or act as:

(a) if the body corporate is an ADI (other than a foreign ADI) - a director or senior manager of the ADI; or

(b) if the body corporate is a foreign ADI - a senior manager of the Australian operations of the ADI; or

(c) if the body corporate is an authorised NOHC - a director or senior manager of the NOHC.

Maximum penalty: 60 penalty units.

(6) An offence against subsection (5) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code.

(7) In a prosecution under subsection (4) or (5), it is a defence if:

(a) the person was a disqualified person only because he or she was disqualified by APRA under section 21; and

(b) the defendant contacted APRA within a reasonable period before allowing the person to be or act as a director or senior manager (as the case may be); and

(c) the defendant was incorrectly advised by APRA that the person was not a disqualified person under section 21.

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

(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.

Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

20 Who is a disqualified person ?

(1) A person is a disqualified person if, at any time (whether before or after the commencement of this section):

(a) the person has been convicted of an offence against or arising out of:

(i) this Act; or

(ii) the Financial Sector (Collection of Data) Act 2001; or

(iii) the Corporations Act 2001, the Corporations Law that was previously in force, or any law of a foreign country that corresponds to that Act or to that Corporations Law; or

(b) the person has been convicted of an offence against or arising out of a law in force in Australia, or the law of a foreign country, where the offence related or relates to dishonest 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) APRA 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: APRA 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:

(a) section 19B of the Crimes Act 1914; or

(b) a corresponding provision of a law of a State, a Territory or a foreign country.

(3) Nothing in this section affects the operation of Part VIIC of the Crimes Act 1914 (which includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them).

21 APRA may disqualify person

(1) APRA may disqualify a person if it is satisfied that the person is not a fit and proper person to be or to act as someone referred to in paragraph 19(1)(a), (b) or (c) or (2)(a), (b) or (c).

(1A) In deciding whether it is satisfied as mentioned in subsection (1), APRA may take into account:

(a) any matters specified in the regulations for the purposes of this paragraph; and

(b) any other matters APRA considers relevant.

(1B) If regulations specifying matters for the purposes of paragraph (1A)(a) also specify the way in which, the extent to which or the circumstances in which:

(a) the matters; or

(b) any information or material relating to the matters;

may be taken into account by APRA, APRA must comply with the regulations.

(2) A disqualification takes effect on the day on which it is made.

(3) APRA may revoke a disqualification on application by the disqualified person or on its own initiative. A revocation takes effect on the day on which it is made.

(4) APRA must give the person written notice of a disqualification, revocation of a disqualification or a refusal to revoke a disqualification.

(5) As soon as practicable after a notice is given to a person under subsection (4), APRA must cause particulars of the disqualification, revocation or refusal to which the notice relates:

(a) to be given:

(i) if the person is, or is acting as, a person referred to in paragraph 19(1)(a) or (2)(a) - to the ADI concerned; or

(ii) if the person is, or is acting as, a person referred to in paragraph 19(1)(b) or (2)(b) - to the foreign ADI concerned; or

(iii) if the person is, or is acting as, a person referred to in paragraph 19(1)(c) or (2)(c) - to the authorised NOHC; and

(b) to be published in the Gazette.

(6) Part VI applies to a disqualification under this section or to a refusal to revoke such a disqualification.

22 APRA may determine that a person is not a disqualified person

(1) Despite section 20, APRA may determine (in writing) that a person is not a disqualified person . APRA may do so on its own initiative or on the application of the person.

(2) However, APRA may only make the determination if it is satisfied that the person is highly unlikely to be a prudential risk to any ADI or authorised NOHC.

(3) If a person applies for a determination under this section, APRA must:

(a) either make, or refuse to make, the determination; and

(b) in the case of a refusal, give the person written notice of the refusal.

(4) APRA may do any of the following:

(a) when making a determination under subsection (1), specify in the determination conditions to which the determination is to be subject;

(b) at any later time while a determination under subsection (1) is in force, make a further determination specifying conditions or additional conditions to which the determination under subsection (1) is to be subject;

(c) at any time make a determination varying or revoking conditions that have been specified under paragraph (a) or (b).

(5) A determination takes effect on the day on which it is made.

(6) APRA must, as soon as practicable after a determination is made, give written notice of the making of the determination, and a copy of the determination, to the person concerned and to any affected ADI or authorised NOHC.

(7) A notice of a refusal to make a determination, or a notice of the making of a determination that specifies or varies conditions, must state the reasons for the refusal or for the specifying or variation of the conditions, as the case may be.

(8) APRA may revoke a determination under this section by giving written notice to the person concerned and must give a copy of the notice to any affected ADI or authorised NOHC.

(9) The revocation of a determination takes effect on the day specified in the instrument of revocation, which must be not earlier than 7 days after the instrument is signed.

(10) Part VI applies to a refusal of APRA to make a determination under this section, to a determination under this section that specifies conditions, to a determination under this section that varies conditions in a way that is more onerous on the person concerned or to the revocation of a determination under this section.

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

(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) 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:

(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:

(7D) Subsections (7B) and (7C) do not, by implication, limit any other powers of an ADI or authorised NOHC to remove a person.

(8) Part VI applies to a direction given by APRA under this section.