Overview

The Financial Sector (Shareholdings) Act 1998 was enacted to address the need for regulation over significant shareholdings in financial sector companies, ensuring that such entities are managed in a manner that safeguards the stability and integrity of Australia's financial system. This legislation was introduced by the Australian Parliament and its policy objective is to maintain the soundness and efficiency of financial markets by preventing any undue concentration of ownership or control that could pose a systemic risk. In the case of Approval to hold a stake of more than 20% in a financial sector company No. 12 of 2021, the Treasurer, through a delegate, has exercised the powers under the Act to revoke an existing approval and grant new approvals to specified entities, subject to certain conditions aimed at preserving the regulatory balance and preventing excessive control by any single shareholder. This notifiable instrument reflects the continuous oversight required to adapt to changes in the financial landscape while protecting public interest and financial stability.

Scope and Application

The Financial Sector (Shareholdings) Act 1998 applies to individuals and entities seeking to acquire, directly or indirectly, more than a 20% stake in a financial sector company, as defined in section 3 of the Act. The legislation is of national application under Commonwealth jurisdiction, encompassing all financial sector companies within Australia. The Act allows the Treasurer to grant or revoke approvals for such shareholdings, considering them in the national interest. Exclusions and specific limitations are outlined in the Act, and the scope of application can be further defined through subordinate instruments. This particular notifiable instrument revokes an existing approval granted under subsection 14(1) of the Act and provides new approvals to specified applicants, subject to certain conditions detailed in the schedule. These conditions include limits on individual shareholdings to prevent any single entity or individual from gaining undue control over the financial sector companies involved. The instrument is effective from its date of issuance and remains in force until the later of the specified expiration date or the outcome of any further applications for approval made by the applicants by 31 December 2026.

Key Provisions

The main operative sections of the Financial Sector (Shareholdings) Act 1998, as applied in this instrument, focus on the approval process for certain shareholdings in financial sector companies. Under subsection 18(3), the instrument revokes an existing approval previously granted to the existing holders to hold stakes in Wise Australia Pty Ltd. In its place, under paragraph 14(1)(a) of the Act, the instrument approves the new applicants to hold specific stakes exceeding 20% in Wise, TWL, and HoldCo, subject to certain conditions outlined in the schedule (subsection 16(1)). The approval is effective until the earlier of either the date on which the applicants apply for further approval and the application is approved, refused, or withdrawn, or 31 December 2026 (subsection 16(1)). The obligations imposed by this instrument on the parties involved include maintaining compliance with the specified shareholding limits and conditions. The applicants must ensure that their direct control interests in Wise do not exceed the limits set out in the schedule, which are 50% for Kristo Kaarmann, 24% for Taavet Hinrikus, OU Notorious, and Kotilda OU, and 100% for TWL in Wise, HoldCo in TWL, and NewCo, Kristo Kaarmann, Taavet Hinrikus, OU Notorious, and Kotilda OU in HoldCo (subsection 16(1)(a)-(d)). Any change in shareholding that breaches these limits requires prior approval from the Treasurer or their delegate. Additionally, the Treasurer or their delegate is required to provide a copy of this instrument to the financial sector company involved. For any breach of the conditions outlined in this instrument, the Act provides for potential civil and criminal consequences. While the specific penalties are not detailed in the text, it is known that the Act may impose fines, imprisonment, or both, depending on the severity and nature of the breach. The exact penalties would be determined by the courts in the context of each specific case, but they could include substantial fines and imprisonment terms, reflecting the importance of compliance with financial sector regulations to protect national interests and financial stability. This instrument also includes provisions for flow-on approvals. If the approval relates to a financial sector company that is a holding company of an authorised deposit-taking institution or authorised insurance company, subsection 19(1) mandates flow-on approvals for each 100% subsidiary of the holding company. Furthermore, if the approval is held by a company, subsection 19(3) requires flow-on approvals for each officer of the company, ensuring comprehensive coverage and compliance across the entire organisation. This ensures that all related entities and individuals adhere to the same stringent regulatory standards. In summary, this instrument revokes an existing approval for certain shareholdings and grants new approvals under strict conditions, ensuring compliance with national interests and financial stability. The obligations, penalties, and flow-on approval provisions collectively aim to maintain rigorous oversight and governance within the financial sector.