Approval to hold a stake in a financial sector company of more than 20%
Financial Sector (Shareholdings) Act 1998
SINCE
- Sydney Credit Union Ltd ABN 93 087 650 726 (the applicant) has applied to the Treasurer under section 13 of the Financial Sector (Shareholdings) Act 1998 (the Act), for approval to hold a 100% stake in Endeavour Mutual Bank Ltd ABN 43 087 650 011 (the company), which is a financial sector company under the Act;
B. 100% of the gross assets and liabilities of the company are to be transferred to the applicant as a voluntary transfer of business under the Financial Sector (Transfer and Restructure) Act 1999; and
C. I am satisfied that it is in the national interest to approve the applicant holding a stake in the company of more than 20%,
I, Clare Gibney, a delegate of the Treasurer, under subsection 14(1) of the Act, APPROVE the applicant holding a stake of 100% in the company.
This instrument comes into force on the date it is signed and remains in force indefinitely.
Dated: 17 June 2019
[Signed]
…………………
Clare Gibney
General Manager
Specialised Institutions Division
Interpretation
In this Notice:
financial sector company has the meaning given in section 3 of the Act.
stake in relation to a company, has the meaning given in clause 10 of Schedule 1 to the Act.
unacceptable shareholding situation has the meaning given in section 10 of the Act.
Note 1 Under paragraph 16(2)(a) of the Act, the Treasurer may, by written notice given to a person who holds an Approval under section 14, impose one or more conditions or further conditions to which the Approval is subject. Under paragraph 16(2)(b) of the Act, the Treasurer may revoke or vary any conditions imposed under paragraph 16(2)(a) of the Act or specified in the Notice of Approval. The Treasurer’s powers under subsection 16(2) may be exercised on the Treasurer’s own initiative or an application made to the Treasurer in accordance with the requirements of subsection 16(4) of the Act, by the person who holds the Approval (see subsection 16(3) of the Act).
Note 2 A person who holds an Approval under section 14 of the Act may apply to the Treasurer under subsection 17(1) of the Act, to vary the percentage specified in the Approval.
Note 3 Under subsection 17(6) of the Act, the Treasurer may, on the Treasurer’s own initiative, by written notice given to a person who holds an Approval under section 14, vary the percentage specified in the Approval if the Treasurer is satisfied it is in the national interest to do so.
Note 4 The circumstances in which the Treasurer may revoke a person’s Approval under section 14 are set out in subsection 18(1) of the Act.
Note 5 Section 19 of the Act provides for flow-on approvals. If an Approval has been granted for the holding of a stake in a financial sector company and the financial sector company is a holding company for an authorised deposit-taking institution or an authorised insurance company, then an approval is taken to exist for the holding of a stake of equal value in each financial sector company that is a 100% subsidiary of the holding company.
Note 6 Under section 14 of the Act, the Treasurer must give written notice of this Approval to the applicant and financial sector company concerned and must publish a copy of this notice in the Gazette.
Note 7 Under section 11 of the Act, a person or 2 or more persons under an arrangement are guilty of an offence if the person(s) acquires shares in a company and the acquisition has the result, in relation to a financial sector company, that:
(i) an unacceptable shareholding situation comes into existence; or
(ii) if an unacceptable shareholding situation already exists in relation to the company and in relation to a person – there is an increase in the stake held by the person in the company;
and the person(s) was reckless as to whether the acquisition would have that result. A maximum penalty of 400 penalty units applies or by virtue of subsection 4B(3) of the Crimes Act 1914, in the case of a body corporate, a penalty not exceeding 2,000 penalty units. By virtue of section 39 of the Act, an offence against section 11 is an indictable offence.
Overview
The Financial Sector (Shareholdings) Act 1998 was enacted to regulate and prevent unacceptable shareholding situations in financial sector companies, ensuring the stability and integrity of Australia's financial system. This legislation addresses the gap in controlling and monitoring significant shareholdings in financial institutions to safeguard against potential risks that could arise from concentrated ownership. The Act was enacted by the Parliament of Australia and its primary policy objective is to maintain the stability of the financial sector by preventing and managing unacceptable shareholding situations. The Act empowers the Treasurer to approve or disapprove shareholding stakes exceeding 20% in financial sector companies, as illustrated in the case of Sydney Credit Union Ltd's application to hold a 100% stake in Endeavour Mutual Bank Ltd. The Treasurer's approval is granted based on considerations of the national interest, reflecting the importance of maintaining robust financial institutions.
Scope and Application
The Financial Sector (Shareholdings) Act 1998 applies to any person or entity seeking to hold a stake in a financial sector company that exceeds 20%. This Act regulates the shareholdings in entities that fall within the scope of a financial sector company as defined under the Act. The Act is a Commonwealth legislation that ensures the stability and soundness of the financial sector by controlling significant shareholdings. It is pertinent to entities involved in financial services, including banks, insurance companies, and other authorised deposit-taking institutions. The Act does not explicitly state exclusions, but its application can be extended or restricted through subordinate instruments such as conditions imposed by the Treasurer under section 16 of the Act, which may include variations or revocations of approvals.
The geographic and jurisdictional reach of the Act is national, as it is a Commonwealth Act, meaning it applies across Australia. The Act allows the Treasurer to approve or disapprove shareholdings that exceed 20% in financial sector companies, with the approval process involving considerations of national interest. Furthermore, the Act provides mechanisms for the Treasurer to impose, vary, or revoke conditions on approvals, and to vary the percentage of the stake if deemed necessary in the national interest. The Act also includes provisions for offences related to reckless acquisitions that result in unacceptable shareholding situations, with penalties that can apply to both individuals and corporate entities.
Key Provisions
The Financial Sector (Shareholdings) Act 1998 provides for the regulation of shareholdings in financial sector companies. Under section 13, an application can be made to the Treasurer for approval to hold a stake in a financial sector company exceeding 20%. This provision ensures that the Treasurer can assess whether such a shareholding would be in the national interest. In this particular case, Sydney Credit Union Ltd has applied for and been granted approval to hold a 100% stake in Endeavour Mutual Bank Ltd, as detailed in section 14 of the Act. The approval hinges on the transfer of all gross assets and liabilities of the company to the applicant under the Financial Sector (Transfer and Restructure) Act 1999, and the Treasurer’s satisfaction that it is in the national interest.
The Act imposes several obligations on the parties involved. For instance, the Treasurer must notify the applicant and the financial sector company concerned of the approval and publish the notice in the Gazette, as mandated by section 16. Additionally, section 19 stipulates that if an approval is granted for holding a stake in a financial sector company that is a holding company for an authorised deposit-taking institution or an authorised insurance company, then an approval is taken to exist for holding a stake of equal value in each financial sector company that is a 100% subsidiary of the holding company. These obligations ensure transparency and adherence to national interest criteria in financial sector shareholdings.
The Act also outlines consequences for breaches of its provisions. Under section 11, any person or group of persons under an arrangement who acquire shares in a company resulting in an unacceptable shareholding situation, or an increase in an existing unacceptable shareholding situation, and are reckless about this outcome, commits an offence. The maximum penalty for an individual is 400 penalty units, while for a corporate body, the penalty can be up to 2,000 penalty units, as stated in subsection 4B(3) of the Crimes Act 1914. Furthermore, section 39 classifies this offence as an indictable offence, which means it can be tried in a higher court. These penalties and classifications serve to deter non-compliance and uphold the regulatory framework of financial sector shareholdings.