Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (44 of 1999)
Schedule 4 Amendment of the Life Insurance Act 1995
57 After Part 10
Insert:
Part 10A - Prudential standards and directions
Division 1 - Prudential standards
230A APRA may make prudential standards for life companies
(1) APRA may, in writing, determine standards in relation to prudential matters to be complied with by:
(a) all life companies; or
(b) a specified class of life companies; or
(c) one or more specified life companies;
in order to protect the interests of policy owners or prospective policy owners of the life companies concerned.
Note: A failure to comply with a standard is not an offence, but it may lead to a direction being given under section 230B.
(2) A standard may impose different requirements to be complied with in different situations or in respect of different activities.
(3) A standard is of no effect to the extent that it conflicts with this Act.
(4) A standard:
(a) comes into force:
(i) unless subparagraph (ii) applies - on the day on which the determination of the standard is made; or
(ii) if that determination specifies a later day as the day on which the standard comes into force - on the day so specified; and
(b) continues in force until it is revoked.
(5) APRA may, in writing, vary or revoke a standard.
(6) Subject to subsection (11), if APRA determines or varies a standard referred to in paragraph (1)(a) or (b) it must, as soon as practicable, cause a notice advising of the determination of the standard, or of the variation of the standard, and summarising the purpose and effect of the standard or variation, to be published:
(a) in the Gazette; and
(b) in a daily newspaper or daily newspapers circulating generally in each State or Territory.
(7) If APRA determines or varies a standard referred to in paragraph (1)(c) it must, as soon as practicable, give a copy of the standard, or of the variation, to the life company, or to each life company, to which the standard applies.
(8) If APRA revokes a standard referred to in paragraph (1)(a) or (b) it must, as soon as practicable, cause a notice of the revocation to be published:
(a) in the Gazette; and
(b) in a daily newspaper or daily newspapers circulating generally in each State or Territory.
(9) If APRA revokes a standard referred to in paragraph (1)(c) it must, as soon as practicable, give notice of the revocation to the life company, or to each life company, to which the standard applied.
(10) Subject to subsection (11), APRA must ensure that copies of the current text of the standards are available for inspection and purchase.
(11) If APRA considers that a standard, or a variation of a standard, contains commercially sensitive information:
(a) APRA is not required to include that information in a notice published under subsection (6) or in the version of the standard that is available under subsection (10); but
(b) APRA may include some or all of that information in either or both of those things if APRA considers it appropriate to do so.
(12) A failure to comply with subsection (6), (7), (8), (9) or (10) does not affect the validity of the action concerned.
(13) In this section:
Territory means an internal Territory, or an external Territory to which this Act extends.
Division 2 - Directions
230B APRA may give directions in certain circumstances
(1) APRA may give a life company a direction of a kind specified in subsection (2) if APRA considers that:
(a) the company has contravened this Act or a condition referred to in subsection 22(1) or paragraph 125A(4)(a) or 125B(4)(a); or
(b) the direction is necessary in the interests of policy owners or prospective policy owners of the company.
The direction is to be by notice in writing given to the company.
(2) The kinds of direction the life company may be given are as follows:
(a) a direction to comply with the whole or a part of this Act or with a condition referred to in paragraph (1)(a);
(b) a direction to order an audit of the affairs of the company, at the expense of the company, by an auditor chosen by APRA;
(c) a direction to order an actuarial investigation of the affairs of the company, at the expense of the company, by an actuary chosen by APRA;
(d) a direction to do all or any of the following:
(i) remove a director, secretary, executive officer or employee of the company from office;
(ii) ensure a director, secretary, executive officer or employee of the company does not take part in the management or conduct of the business of the company except as permitted by APRA;
(iii) appoint a person or persons as a director, secretary, executive officer or employee of the company for such term as APRA directs;
(e) a direction to remove any auditor of the company from office and appoint another auditor to hold office for such term as APRA directs;
(f) a direction to terminate the appointment of the appointed actuary of the company and to appoint another actuary to hold office for such term as APRA directs;
(g) a direction not to give any financial accommodation to any person;
(h) a direction not to issue any policy or collect any premium;
(i) a direction not to borrow any amount;
(j) a direction 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) a direction not to repay any amount paid on shares;
(l) a direction not to pay a dividend on any shares;
(m) a direction not to discharge any policy or other liability;
(n) a direction not to transfer any asset of a statutory fund;
(o) a direction not to pay or transfer any amount to any person, or create an obligation (contingent or otherwise) to do so;
(p) a direction not to undertake any financial obligation (contingent or otherwise) on behalf of any other person;
(q) any other direction as to the way in which the affairs of the company are to be conducted or not conducted.
A direction under paragraph (o) not to pay any amount does not apply to the payment or transfer of money pursuant to an order of a court or a process of execution.
(3) 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 the 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.
(4) The direction may deal with the time by which, or period during which, it is to be complied with.
(5) The life company 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 life company, vary the direction if, at the time of the variation, it considers that the variation is necessary or appropriate.
(7) APRA may, by notice in writing to the life company, revoke the direction if, at the time of the revocation, it considers that the direction is no longer necessary or appropriate.
(8) The direction ceases to have effect if:
(a) APRA revokes it under subsection (7); or
(b) the Court orders that the company be wound up; or
(c) for a company that is a friendly society referred to in subsection 180(2) - the members of the society have passed a special resolution that the society be wound up.
(9) APRA must not give a direction under this section in relation to any part of the business of a life company if:
(a) that part of that business is under the control of a judicial manager; or
(b) the Court has ordered that the company be wound up; or
(c) for a company that is a friendly society referred to in subsection 180(2) - the members of the society have passed a special resolution that the society be wound up.
230C Direction not grounds for denial of obligations
(1) Subject to subsections (2) and (3), the fact that a life company is subject to a direction by APRA under section 230B is not a ground for any other party to a contract to which the company is a party to deny any obligations under that contract, accelerate any debt under that contract or close out any transaction relating to that contract.
(2) If a life company is prevented from fulfilling its obligations under a contract because of a direction under section 230B, other than a direction under paragraph 230B(2)(m), the other party or parties to the contract are, subject to any orders made under subsection (3), relieved from obligations owed to the company under the contract.
(3) A party to a contract to which subsection (2) applies may apply to the Court for an order relating to the effect on the contract of a direction under section 230B. 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.
The order must not require a person to take action that would contravene the direction, or any other direction under section 230B.
230D Supply of information about issue and revocation of directions
Power to publish notice of directions in Gazette
(1) APRA may publish in the Gazette notice of any direction made under section 230B. The notice must include the name of the life company given the direction and a summary of the direction.
Requirement to publish notice of revocation of certain directions in Gazette
(2) If APRA publishes notice of a direction made under section 230B and then later revokes the direction, APRA must publish in the Gazette notice of that revocation as soon as practicable after the revocation. Failure to publish notice of the revocation does not affect the validity of the revocation.
Requirement to provide information about direction to Treasurer
(3) If the Treasurer requests APRA to provide information about:
(a) any directions under section 230B in respect of a particular life company; or
(b) any directions made during a specified period under section 230B in respect of any life companies;
APRA must comply with the request.
Power to inform Treasurer of direction
(4) APRA may provide any information that it considers appropriate to the Treasurer about any directions, or revocations of directions, made under section 230B, in respect of any life company, at any time.
Requirement to inform Treasurer of revocation of direction if informed of making of direction
(5) If APRA provides the Treasurer with information about a direction and then later revokes the direction, APRA must notify the Treasurer of the revocation of the direction as soon as practicable after the revocation. Failure to notify the Treasurer does not affect the validity of the revocation.
230E Secrecy requirements
Information relating to directions and revocations of directions is subject to the secrecy requirements in Part 6 of the Australian Prudential Regulation Authority Act 1998, unless the information has been published in the Gazette under section 230D of this Act.
230F Non-compliance with a direction
(1) A life company is guilty of 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 section 230B.
Maximum penalty: 50 penalty units.
Note: If a body corporate is convicted of an offence against this subsection, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to 5 times the penalty stated above.
(2) If a life company does or fails to do an act in circumstances that give rise to the company committing an offence against subsection (1), the company is guilty of 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 company committing the offence continue (including the day of conviction for any such offence or any later day).
Note: This subsection is not intended to imply that section 4K of the Crimes Act 1914 does not apply to offences against this Act or the regulations.
(3) An officer of a life company is guilty of an offence if:
(a) the officer fails to take reasonable steps to ensure that the company complies with a direction given to it under section 230B; and
(b) the officer's duties include ensuring that the company complies with the direction, or with a class of directions that includes the direction.
Maximum penalty: 50 penalty units.
Note: If a body corporate is convicted of an offence against this subsection, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to 5 times the penalty stated above.
(4) If an officer of a life company fails to take reasonable steps to ensure that the company complies with a direction given to it under section 230B in circumstances that give rise to the officer committing an offence against subsection (3), the officer is guilty of an offence against that subsection in respect of:
(a) the first day on which the offence is committed; and
(b) each subsequent day (if any) on which the circumstances that gave rise to the officer committing the offence continue (including the day of conviction for any such offence or any later day).
Note: This subsection is not intended to imply that section 4K of the Crimes Act 1914 does not apply to offences against this Act or the regulations.
(5) In this section, officer has the meaning given by section 9 of the Corporations Law.