Overview

The Financial Sector (Shareholdings) Act 1998 was enacted to regulate and manage significant shareholdings in financial sector companies, aiming to protect the stability and integrity of Australia's financial system. This legislation addresses the potential risks posed by concentrated ownership and seeks to ensure that shareholders in financial institutions act in the best interests of the broader financial market. The Act was enacted by the Parliament of Australia and its primary policy objective is to maintain and enhance the safety and soundness of the financial sector by controlling and regulating substantial shareholdings in financial companies. In the case of F2020N00147 (Notifiable instrument), the approval to hold a stake of more than 20% in a financial sector company, specifically for Kristó Kaarmann and Taavet Hinrikus in relation to TransferWise Ltd, was granted by Therese McCarthy Hockey, a delegate of the Treasurer, under the authority provided by the Act. This approval was deemed to be in the national interest and is subject to specific conditions outlined in the attached schedule, which include limitations on individual shareholdings to prevent any single applicant from holding a direct control interest of more than 20% without prior approval.

Scope and Application

The Financial Sector (Shareholdings) Act 1998 applies to individuals or entities seeking to hold a stake of more than 20% in a financial sector company, specifically targeting their conduct and transactions in relation to such holdings. This Act operates at the Commonwealth level and requires that such shareholdings be approved by the Treasurer or a delegate, such as in this case, Therese McCarthy Hockey. The approval is given on the basis that it is in the national interest, and the approval may be subject to conditions to manage potential risks associated with such significant shareholdings. This legislation extends its application through subordinate instruments, as evidenced by the flow-on approvals mentioned in section 19 of the Act, which allows for approvals to be extended to subsidiaries and officers of the approved entities. This approval instrument is specific to the applicants named in the schedule and is subject to the conditions outlined, such as the limitation on individual shareholdings and the requirement for prior approval for direct control interests exceeding 20%.

Key Provisions

The Financial Sector (Shareholdings) Act 1998, under subsection 13(1), allows the Treasurer to approve an individual or entity to hold more than a 20% stake in a financial sector company. In this instance, under subsection 14(1)(a), the applicants, Kristos Kaarmann and Taavet Hinrikus, along with the persons named in the schedule, have been approved to hold a 32% stake in TransferWise Ltd (section 1). This approval is contingent on the Treasurer being satisfied that it is in the national interest (subsection 13(2)). The approval is subject to specific conditions outlined in the attached schedule, which include limits on individual shareholdings and require prior approval from the Treasurer for any individual to hold a direct control interest of more than 20% in the company (subsection 16(1)). The Act imposes several obligations on the applicants and the financial sector company. The applicants must adhere to the conditions set out in the schedule, which includes ensuring that no individual may hold a direct control interest exceeding 20% in TransferWise Ltd without prior approval (Schedule). The Treasurer or their delegate is required to give a copy of this instrument to the financial sector company and publish it in the Gazette (subsection 19(4)). Additionally, the Act includes provisions for flow-on approvals, meaning that if an approval is granted for a holding company, it extends to its subsidiaries, and if a company is approved, each of its officers is also approved (subsection 19(1) and (3)). Failure to comply with the conditions of the approval may result in civil and criminal penalties. Under the Act, any breach of the conditions may lead to the revocation of the approval, fines, and other sanctions. The maximum penalties for such breaches are not specified in the provided text but would typically be detailed in the Act itself or in related legislation. It is essential for the applicants to ensure compliance with all conditions to avoid potential legal consequences.