Following the passing of the Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008, (assented to 26 May 2008) the process for disqualifying an individual from holding prudentially significant roles within APRA regulated entities has changed.
Previously, APRA was able to make an administrative (internal) decision to disqualify an individual, which was then subject to internal and external review, upon request.
Under the new process, which is identical across the Banking Act, Superannuation Industry (Supervision) Act, Insurance Act and the Life Insurance Act, APRA may apply to the Federal Court seeking orders that a person be disqualified from prudentially significant roles in a specified industry. The Court has a variety of powers available to it, including specifying the period of any disqualification, specifying the roles the disqualification relates to and whether the disqualification is limited to a specific entity, class of entity or any entity under the relevant Act. The Court also has powers to revoke or vary a disqualification.
An individual can also automatically become a ‘disqualified person’; for example, if he or she is convicted of an offence involving dishonest conduct or becomes bankrupt. APRA’s disqualification register only records individuals disqualified by the Court (or formerly by APRA) and not those automatically disqualified.
APRA may become concerned about an individual’s fitness and propriety or conduct through its normal supervision work, formal investigations, information provided under whistleblowers provisions or from other regulators.
Once a concern is identified APRA first undertakes a preliminary assessment of the circumstances and evidence available to it about the individual’s alleged conduct. If satisfied that a sound case has been made for disqualification, APRA will commence proceedings in the Federal Court. The matter will then proceed as a form of civil litigation in that Court. It is anticipated that the process will not be dissimilar to that which occurs when ASIC commences proceedings under sections 206D or 206E of the Corporations Act.
In the event that the Court orders that the individual be disqualified, APRA is also required to notify the relevant employer and to publish a notice in the Commonwealth Government Gazette. A record of the disqualification is also entered on the APRA disqualification register. A media release may also be issued. If appropriate, APRA advises other regulators and any relevant professional associations.
A disqualified individual can appeal the decision of the Court. The Federal Court Rules apply to such appeals.
A disqualified person may apply to the Court to have a disqualification revoked or varied at any time. Alternatively, APRA may apply to the Court seeking such Orders.