Overview

The Revocation of existing approval and granting of new approval to hold a stake in a financial sector company of more than 20% No. 1 of 2022 instrument is a notifiable instrument made under the Financial Sector (Shareholdings) Act 1998. This Act was enacted to address the problem of controlling significant shareholdings in financial sector companies, ensuring that such holdings do not pose a risk to the stability of the financial system. The instrument was introduced by the Australian Prudential Regulation Authority (APRA), the relevant body responsible for regulating and supervising Australia's prudential standard setters and financial institutions, acting as a delegate of the Treasurer. The policy objective of the instrument is to facilitate the transfer of existing shareholdings from the current holders to new applicants, while ensuring that the national interest is protected. This is achieved by revoking the existing approval for certain entities to hold a 100% stake in specified financial sector companies and granting new approval to the applicants, thereby ensuring the continued oversight of these significant shareholdings.

Scope and Application

The Financial Sector (Shareholdings) Act 1998 applies to persons or entities seeking approval to hold a stake in a financial sector company exceeding 20%, particularly those holding or applying for controlling interests in authorised insurance companies and their associated entities. The Act, applicable on a national level within Australia, grants the Treasurer or their delegate the authority to approve or revoke such holdings based on the national interest. This notifiable instrument, F2022N00099, revokes the existing approval of certain stakeholders from holding a 100% stake in RGA Reinsurance Company of Australia Limited and other specified financial sector companies, and grants new approval to other applicants for the same holdings. The revocation and new approval are effective indefinitely from the instrument's date of issuance, 13 April 2022. The instrument also mandates the Treasurer or their delegate to provide a copy to the relevant financial sector company and acknowledges that flow-on approvals may be required for subsidiaries and officers of companies holding such stakes, as outlined in section 19 of the Act.

Key Provisions

This legislation, the "Revocation of existing approval and granting of new approval to hold a stake in a financial sector company of more than 20% No. 1 of 2022" under the Financial Sector (Shareholdings) Act 1998 (the Act), revokes existing approval for certain companies to hold a 100% stake in RGA Reinsurance Company of Australia Limited and its associated financial sector companies, and grants new approval for other companies to hold a 100% stake in the same entities (subsection 18(3) and paragraph 14(1)(a)). The existing approval holders had previously been granted permission to hold a 100% stake in these companies, as detailed in Schedule 2, and requested that this approval be revoked on 3 December 2021. On the same day, the applicants submitted an application for new approval to hold the same stake, as outlined in Schedule 4. The legislation reflects that it is in the national interest for the applicants to hold this stake, thus revoking the existing approval and granting new approval accordingly. The Act imposes specific obligations on the parties involved. The existing approval holders are required to cease holding a 100% stake in the financial sector companies as per the revoked approval. The applicants, now approved to hold the same stake, must comply with all conditions and requirements set out in the Act, including any additional conditions specified by the Treasurer or their delegate. The Treasurer or their delegate is also obligated to provide a copy of this instrument to the relevant financial sector company. Breaching the provisions of this legislation can lead to various penalties and consequences. While the specific penalties are not detailed within the Act itself, breaches of the Financial Sector (Shareholdings) Act 1998 generally may result in substantial fines and other legal repercussions. The maximum penalties can vary depending on the nature and severity of the breach, and are typically outlined in other sections of the Act or related legislation. Civil and criminal consequences could also apply, with the exact nature of these consequences being determined by the courts based on the specifics of the case.