Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

asked the Minister representing the Treasurer, upon notice, on 1 November 2012:

With reference to the Financial Sector (Shareholdings) Act1998 and its application to Authorised Deposit-taking Institutions (ADIs), and in particular Section 8, which sets out shareholding limits by reference to voting power, and subclause 10(1) of Schedule 1, which defines the stake that a person holds in a company at a particular time as 'the aggregate of: (a) the direct control interests in the company that the person holds at that time; and (b) the direct control interests in the company held at that time by associates of the person':

(1) Would a company that makes an application to the Australian Prudential Regulation Authority (APRA) to become licensed as an ADI, which has a majority of its capital of $2.5 million sourced from one individual through fully paid non-voting shares and a minority of its capital, $500 000, sourced through partly paid voting shares belonging to several individuals (between them having all the voting power but with no individual holding more than 15 per cent of the voting stock), be rejected on the grounds that the funding base is not diversified in accordance with the requirements of the Act; if so:

(a) what would be the legislative grounds for rejecting this application; and

(b) is it the intention of the Act that such an application would be rejected on the grounds that the funding base is not diversified.

(2) Does APRA require a diversification of not only the voting power but also the economic ownership for financial sector companies to comply with the 15 per cent shareholding limit; if so:

(a) what is the legislative requirement for such diversification under the Act;

(b) does the Minister consider such diversification to be the correct interpretation of the legislation; and

(c) why does the Act appear to establish that a person's stake is related to their voting power rather than their economic interest.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

The 15 per cent control threshold in the Financial Sector (Shareholdings) Act 1998 is based on the concept of voting power. However a person with less than 15 per cent voting power may be declared to have practical control over a financial sector company, for example if the company's directors are accustomed or under an obligation to act in accordance with that person's wishes.

The FSSA does not impose a blanket prohibition on a person controlling a financial sector company. However it does require the person to obtain the approval of the Treasurer (or APRA, where it exercises the relevant delegation). Approval may be granted if it is deemed consistent with the national interest. Prudential considerations are a key factor in determining the national interest in these circumstances.