Approval to hold the transferring business of a financial sector company No. 3 of 2021
Financial Sector (Shareholdings) Act 1998
To: Teachers Mutual Bank Limited ABN 30 087 650 459 (the applicant) SINCE:
- the applicant has applied to the Treasurer under subsection 13(1) of the Financial Sector (Shareholdings) Act 1998 (the Act) for approval to hold a stake of more than 20% in Pulse Credit Union Ltd ABN 35 087 651 670 (the financial sector company);
B. 100% of the gross assets and liabilities of the financial sector 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 of more than 20% in the financial sector company,
I, Lara Douglas, a delegate of the Treasurer, under paragraph 14(1)(a) of the Act, APPROVE the applicant holding a stake of 100% in the financial sector company.
This instrument takes effect on the day it is made and remains in force indefinitely. Dated: 3 August 2021
Lara Douglas General Manager Banking Division
Interpretation
In this instrument:
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.
Notes
Note 1 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 2 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 3 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 4 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 5 Under section 14 of the Act, the Treasurer must give written notice of this Approval to the applicant and financial sector company concerned and this instrument will be registered in the Federal Register of Legislation as a notifiable instrument.
Note 6 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.
Note 7 Under subsection 32(3) of the Act, if a person has engaged in or is proposing to engage in any conduct in contravention of a condition to which an approval under section 14 is subject, the Federal Court may, on the application of the Treasurer, grant an injunction:
(i) restraining the person engaging in the conduct; and
(ii) if in the Court’s opinion, it is desirable to do so, requiring the person to do something.
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Overview
The Financial Sector (Shareholdings) Act 1998 was enacted to address potential conflicts of interest and maintain stability within Australia's financial sector by regulating significant shareholdings in financial sector companies. The Act provides a framework for the Treasurer to approve or disapprove the acquisition of stakes in financial sector companies, ensuring that the national interest is protected. This notifiable instrument, Approval to hold the transferring business of a financial sector company No. 3 of 2021, was issued by Lara Douglas, a delegate of the Treasurer, to the Teachers Mutual Bank Limited, granting approval for the bank to hold a stake of 100% in Pulse Credit Union Ltd. This approval aligns with the policy objective of the Act to prevent unacceptable shareholding situations that could compromise the financial system's integrity and stability.
Scope and Application
The Financial Sector (Shareholdings) Act 1998 applies to entities and individuals seeking to acquire a significant stake in financial sector companies, which are defined within the Act. This legislation has a national reach and applies across the Commonwealth of Australia. The Act allows for the Treasurer to approve certain shareholdings, such as the one granted to Teachers Mutual Bank Limited in this case, where it is deemed to be in the national interest. The approval process ensures that the acquisition of a stake in a financial sector company does not lead to an unacceptable shareholding situation. Additionally, the Act includes provisions for varying, revoking, and extending approvals, as well as imposing penalties for reckless acquisitions that contravene the Act. This approval is subject to conditions, and any contravention of these conditions can be addressed by the Federal Court through injunctions. The Act does not explicitly state exclusions or exemptions, but the approval process itself may implicitly exclude certain acquisitions deemed not to be in the national interest.
Key Provisions
The main operative sections of the notifiable instrument involve the approval granted to Teachers Mutual Bank Limited to hold a 100% stake in Pulse Credit Union Ltd, a financial sector company. This approval is based on the application made under section 13(1) of the Financial Sector (Shareholdings) Act 1998, which requires the Treasurer's consent for holding a stake of more than 20% in a financial sector company (section 14). This specific approval allows for the transfer of all gross assets and liabilities of Pulse Credit Union Ltd to Teachers Mutual Bank Limited as per the Financial Sector (Transfer and Restructure) Act 1999. The approval process ensures that such a significant shareholding is in the national interest, as stipulated in section 14(1)(a) of the Act.
The obligations imposed by the Act on Teachers Mutual Bank Limited and Pulse Credit Union Ltd include compliance with the conditions set forth in the approval, such as the voluntary transfer of business as outlined in the Financial Sector (Transfer and Restructure) Act 1999. Both entities must ensure that their operations and transactions align with the regulatory framework governing financial sector shareholdings. Additionally, Teachers Mutual Bank Limited is required to notify the Treasurer if there are any changes in the percentage of their shareholding, as per section 17 of the Act. The approval document also mandates that the Treasurer will be informed and that the instrument will be registered in the Federal Register of Legislation (section 14 and Note 5).
The Act imposes several potential consequences for breaches of its provisions. Firstly, under section 11, any person or group of persons acquiring shares in a financial sector company that results in an unacceptable shareholding situation, or increases an existing unacceptable shareholding situation, while being reckless about the outcome, commits an offence. This offence carries a maximum penalty of 400 penalty units for an individual and 2,000 penalty units for a body corporate, as per subsection 4B(3) of the Crimes Act 1914. Furthermore, section 39 of the Act classifies such offences as indictable. Additionally, under subsection 32(3), the Federal Court has the authority to grant injunctions to restrain any conduct that contravenes the conditions of the approval or to require specific actions if deemed desirable by the Court.