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Australian Securities
and Investments Commission
Office address (inc courier deliveries):
Level 5, 100 Market Street,
Sydney NSW 2000
Mail address for Sydney office:
GPO Box 9827,
Brisbane QLD 4001
Tel: +61 1300 935 075
Fax: +61 1300 729 000
www.asic.gov.au/
Discretionary Payments Team
Risk & Claims Branch
Department of Finance
13 April 2022
By email: xxx@xxxxxxx.xxx.xx
Private & Confidential
Dear Sir/Madam
ACT OF GRACE APPLICATION SUBMITTED BY s22(1)(a)(ii)
ON BEHALF OF CLIENTS
OF s22(1)(a)(ii)
1. ASIC refers to the applications (
Applications) submitted to the Department
of Finance (
Finance) by s22(1)(a)(ii) seeking act of grace payments totalling
$11,363,828.41 on behalf of 20 individuals (
Applicants).
2. The Applications are made under subsection 65(1) of the
Public
Governance, Performance and Accountability Act 2013 (Cth) (
PGPA Act)
in relation to losses suffered by the Applicants’ dealings with s22(1)(a)(ii)
and his company Papalia Enterprises Pty Ltd (
Papalia Enterprises).
A table listing the Applicants is at
Annexure A.
3. The Applications are each accompanied by a form signed by each of the
Applicants authorising s22(1)(a)(ii)
from s22(1)(a)(ii) to act on behalf of each
Applicant.
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STATUTORY FRAMEWORK FOR ACT OF GRACE PAYMENTS
16. Subsection 65(1) of the PGPA Act sets out the statutory basis for the Finance
Minister to authorise and act of grace payment to an applicant. It states
that:
The Finance Minister may, on behalf of the Commonwealth,
authorise, in writing, one or more payments to be made to a
person if the Finance Minister considers it appropriate to do so
because of special circumstances.
(emphasis added)
17. The terms
‘appropriate’ and
‘special circumstances’ are not defined in the
PGPA Act. Section 65 confers a broad discretion on the Finance Minister or
delegate.
18. Resource Management Guide 401: Requests for discretionary financial
assistance under the
Public Governance, Performance and Accountability
Act 2013 (
RMG 401) describes the types of discretionary financial assistance,
including act of grace payments, which may be authorised by the Finance
Minister under the PGPA Act.
19. RMG 401 states at paragraphs 3 and 4:
‘The act of grace mechanism is generally a remedy of last resort
and it is not used when there is another viable remedy available
to provide redress in the circumstances giving rise to the
application.
If other avenues for a person to receive financial assistance from
the Commonwealth (such as existing legislation or schemes), it is
recommended that those avenues are investigated before a
request is made for an act of grace payment.’
20. RMG 401 states at paragraph 10 that examples of special circumstances
which may make it appropriate to approve an act of grace payment
include where:
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a. an act of a non-corporate Commonwealth entity has caused an
unintended and inequitable result to the individual seeking the
payment;
b. Commonwealth legislation or policy has had an unintended,
anomalous, inequitable or otherwise unacceptable impact on the
applicant’s circumstances and those circumstances were specific to
the applicant, outside the parameters of events for which the
applicant was responsible or had the capacity to adequately
control and consistent with what could be considered to be the
broad intention of the relevant legislation; or
c. the matter is not covered by legislation or a specific policy, but the
Commonwealth Government intends to introduce such legislation or
policy, and it is considered desirable in a particular case to apply the
benefits of the relevant policy prospectively.
ASIC RESPONSE
21. In preparing its response, ASIC has considered the statutory framework for
act of grace payments and RMG 401, referred to above at paragraphs 16
to 20.
22. ASIC notes the contents of its
Information Sheet 152: Public comment of
ASIC’s regulatory activities (
INFO Sheet 152) and that ASIC’s ability to
comment on its regulatory activities is restricted because of legislative
restrictions on the disclosure of material provided to ASIC in confidence7,
the
Privacy Act 1988 (Cth), legal professional privilege and public interest
immunity.
23. Subject to the restrictions noted at paragraph 22 above, ASIC has prepared
a chronology of key events at
Annexure B.
ASIC’s statutory objectives
24. ASIC regulates corporations, managed investment schemes, participants in
the financial services industry and people who engage in credit activities
under a number of Commonwealth laws. These laws include the
Corporations Act 2001 (Cth) (
Corporations Act),
Australian Securities and
7 Section 127(1) of the ASIC Act 2001
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Investments Commission Act 2001 (Cth)
(
ASIC Act) and the
National
Consumer Credit Protection Act 2009 (Cth) (
National Credit Act).
25. The objectives of ASIC, as set out in subsection 1(2) of the ASIC Act,
relevantly include that ASIC
‘take whatever action it can take, and is
necessary, in order to enforce and give effect to the laws of the
Commonwealth that confer functions and powers on it’: see subsection
1(2)(g).
26. It is clear from the terms of subsection 1(2) of the ASIC Act that it does not
impose a legal duty, obligation or requirement on ASIC to take any
particular action on any given set of facts. ASIC must strive to achieve its
objectives but is not under an obligation to anybody to take any particular
action.8
27. ASIC’s
Information Sheet 151: ASIC’s approach to enforcement (
INFO Sheet
151) sets out how ASIC selects matters for formal investigation.
28. INFO Sheet 151 states that ASIC considers the following issues when
deciding whether to take enforcement action:
a. ASIC’s strategic priorities, taking into account such matters as the
seriousness of the alleged misconduct;
b. the regulatory benefits of pursuing the alleged misconduct;
c. the issues specific to a case, such as the availability of evidence
admissible in court and whether the alleged conduct is
continuing; and
d. alternatives to a formal investigation which might address ASIC’s
concerns more effectively, such as engagement with
stakeholders and surveil ance.
29. ASIC’s statutory obligations mean that ASIC is to take the enforcement
action it decides is best suited to the evidence available to it at the relevant
time. As stated in INFO Sheet 151, ASIC:
‘ … can pursue a variety of enforcement remedies, dependent
on the seriousness and consequences of misconduct. Some
8
Bhagat v Global Custodians Ltd [2000] NSWSC 321 at [8] and [12]
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s37(2)(b), s47C, s47E(d)
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s37(2)(b), s47C, s47E(d)
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List of Annexures
Annexure A – table listing the Applicants
Annexure B – Chronology of key events.
s47F
Annexure G – Extracts from the
Corporations Act 2001 (Cth) and the
National
Consumer Credit Protection Act 2009 (Cth)
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Annexure G
Extracts from the Corporations Act 2001 (Cth) and the National Consumer
Credit Protection Act 2009 (Cth)
Section 206F of the Corporations Act 2001 (Cth) – ASIC’s power of
disqualification
Power to disqualify
(1) ASIC may disqualify a person from managing corporations for up to
5 years if:
(a) within 7 years immediately before ASIC gives a notice under
paragraph (b)(i):
(i) the person has been an officer of 2 or more corporations;
and
(ii) while the person was an officer, or within 12 months after
the person ceased to be an officer of those corporations,
each of the corporations was wound up and a liquidator
lodged a report under subsection 533(1) (including that
subsection
as
applied
by
section 526-35
of
the
Corporations (Aboriginal and Torres Strait Islander) Act
2006) about the corporation’s inability to pay its debts; and
(b) ASIC has given the person:
(i) a notice in the prescribed form requiring them to
demonstrate why they should not be disqualified; and
(ii) an opportunity to be heard on the question; and
(c) ASIC is satisfied that the disqualification is justified.
(1A) To avoid doubt, the references in paragraph (1)(a) to corporations
include references to Aboriginal and Torres Strait Islander
corporations.
Grounds for disqualification
(2) In determining whether disqualification is justified, ASIC:
(a) must have regard to whether any of the corporations
mentioned in subsection (1) were related to one another; and
(b) may have regard to:
(i) the person’s conduct in relation to the management,
business or property of any corporation; and
(ii) whether the disqualification would be in the public interest;
and
(ii ) any other matters that ASIC considers appropriate.
(2A) To avoid doubt, the references in subsection (2) to a corporation
includes a reference to an Aboriginal and Torres Strait Islander
corporation.
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Notice of disqualification
(3) If ASIC disqualifies a person from managing corporations under this
section, ASIC must serve a notice on the person advising them of the
disqualification. The notice must be in the prescribed form.
Start of disqualification
(4) The disqualification takes effect from the time when a notice
referred to in subsection (3) is served on the person.
Section 920A of the Corporations Act Corporations Act 2001 (Cth) – ASIC’s
power to make a banning order
Making a banning order
(1) ASIC may, in writing, make one or more orders (
banning orders)
against a person if:
(a) ASIC suspends or cancels an Australian financial services
licence held by the person; or
(b) the person has not complied with their obligations under
section 912A; or
(ba) ASIC has reason to believe that the person is likely to
contravene their obligations under section 912A; or
(bb) the person becomes a Chapter 5 body corporate or an
insolvent under administration; or
(c) the person is convicted of fraud; or
(d) ASIC has reason to believe that the person is not a fit and
proper person to:
(i) provide one or more financial services; or
(ii) perform one or more functions as an officer of an entity
that carries on a financial services business; or
(ii ) control an entity that carries on a financial services
business; or
(da) ASIC has reason to believe that the person is not adequately
trained, or is not competent, to:
(i) provide one or more financial services; or
(ii) perform one or more functions as an officer of an entity
that carries on a financial services business; or
(ii ) control an entity that carries on a financial services
business; or
(db) the person has not complied with any one or more of his or her
obligations under section 921F (requirements relating to
provisional relevant providers); or
(dc) both of the following apply:
(i) a supervisor referred to in section 921F has not complied
with any one or more of his or her obligations under that
section in relation to a provisional relevant provider;
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(ii) both the supervisor and the provisional relevant provider
are authorised to provide personal advice to retail clients,
on behalf of the person, in relation to relevant financial
products; or
(dd) both of the following apply:
(i) a provisional relevant provider has not complied with his or
her obligations under subsection 921F(7);
(ii) the provisional relevant provider is authorised to provide
personal advice to retail clients, on behalf of the person, in
relation to relevant financial products; or
(de) ASIC has reason to believe that the person was authorised, in
contravention of subsection 921C(2), (3) or (4), to provide
personal advice to retail clients in relation to relevant financial
products; or
(e) the person has not complied with a financial services law (other
than subsection 921E(3) (relevant providers to comply with the
Code of Ethics)); or
(f) ASIC has reason to believe that the person is likely to
contravene a financial services law; or
(g) the person has been involved in the contravention of a
financial services law by another person; or
(h) ASIC has reason to believe that the person is likely to become
involved in the contravention of a financial services law by
another person; or
(i) the person is the operator of, or another person connected
with, an Australian passport fund, and each of the following is
satisfied:
(i) a host regulator for the fund has notified ASIC in writing that
it is of the opinion that the person or the fund has not
complied, is not complying or is not likely to comply with
the law of that host economy to the extent that the law is
administered by the host regulator for the fund (including
the Passport Rules for the host economy for the fund);
(ii) ASIC is of the opinion that it should make the banning
order, given the potential impact of the failure, or potential
failure, to comply on members or potential members of the
fund; or
(j) the person has, at least twice, been linked to a refusal or failure
to give effect to a determination made by AFCA relating to a
complaint that relates to:
(i) a financial services business; or
(ii) credit activities (within the meaning of the
National
Consumer Credit Protection Act 2009); or
(k) subsection (1C) applies to the person in relation to 2 or more
corporations.
Note: To work out whether a person has been linked as
described in paragraph (j), see section 910C.
(1AA) Subsection (1) has effect subject to subsection (2).
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When a person is not a fit and proper person
(1A) For the purposes of paragraph (1)(d), ASIC must have regard to the
matters in section 913BB.
When a person contravenes a financial services law
(1B) To avoid doubt, a person contravenes a financial services law if a
person fails to comply with a duty imposed under that law, even if
the provision imposing the duty is not an offence provision or a civil
penalty provision.
When a person has been an officer of a corporation unable to pay
its debts
(1C) This subsection applies to a person in relation to a corporation if,
within the last 7 years:
(a) the person was an officer of the corporation when the
corporation was:
(i) carrying on a financial services business; or
(ii) engaging in credit activities (within the meaning of
the
National Consumer Credit Protection Act 2009); and
(b) the corporation was wound up either:
(i) while the person was an officer of the corporation; or
(ii) within the 12 months after the person ceased to be an
officer of the corporation; and
(c) a liquidator lodged a report under subsection 533(1) (including
that
subsection
as
applied
by
section 526-35
of
the
Corporations (Aboriginal and Torres Strait Islander) Act
2006) about the corporation’s inability to pay its debts.
Person to be given an opportunity to be heard
(2) Subject to subsection (3), if ASIC has not delegated its power to
make a banning order against a person to a Financial Services and
Credit Panel, ASIC may make the order only after giving the person
an opportunity:
(a) to appear, or be represented, at a hearing before ASIC that
takes place in private; and
(b) to make submissions to ASIC on the matter.
Note: If ASIC delegates its power to make a banning order
against a person to a Financial Services and Credit Panel,
the panel may make the order only after holding a hearing
in relation to the proposed order (see section 157 of the ASIC
Act).
(3) ASIC may make a banning order against a person without giving
the person the opportunities mentioned in subsection (2) if:
(a) either:
(i) ASIC has not delegated its power to make the banning
order to a Financial Services and Credit Panel; or
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(ii) ASIC exercises its power to make the banning order despite
such a delegation; and
(b) ASIC’s grounds for making the banning order are or include
both of the following:
(i) that the suspension or cancellation of the relevant licence
took place under section 915B;
(ii) that the person has been convicted of serious fraud.
Note: See section 34AB of the
Acts Interpretation Act
1901 (effect of delegation).
Special procedure for RSE licensees
(3A) If a person against whom ASIC proposes to make a banning order
is a financial services licensee who is authorised to provide a
superannuation trustee service, the following provisions apply:
(a) ASIC cannot make the banning order if doing so would, in
ASIC’s opinion, have the result of preventing the licensee from
providing that service, unless:
(i) APRA agrees in writing to the making of the banning order;
or
(ii) the licensee’s RSE licence is not in effect, and is not treated
by
section 29GB
of
the
Superannuation
Industry
(Supervision) Act 1993 as if it were in effect;
(b) if ASIC makes the banning order and paragraph (a) does not
apply to that action, ASIC must, within one week, inform APRA
of the action that has been taken.
(3B) A failure to comply with a requirement of subsection (3A) to get the
agreement of APRA about a banning order does not invalidate the
action taken.
Copy of banning order to be given to the person
(4) ASIC must give a copy of a banning order to the person against
whom it was made.
Section 920B of the Corporations Act 2001 (Cth) – What a banning order
prohibits
(1) A banning order made against a person may specify that the person is
prohibited from doing one or more of the following:
(a) providing any financial services;
(b) providing specified financial services in specified
circumstances or capacities;
(c) controlling, whether alone or in concert with one or more other
entities, an entity that carries on a financial services business;
(d) performing any function involved in the carrying on of a
financial services business (including as an officer, manager,
employee, contractor or in some other capacity);
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(e) performing specified functions involved in the carrying on of a
financial services business.
(2) The banning order may specify that a particular prohibition
specified in the order applies against the person:
(a) if the sole ground for the banning order is because
paragraph 920A(1)(k) applies—for a specified period of up to 5
years; or
(b) otherwise—either permanently or for a specified period.
Note: This subsection applies separately to each prohibition
specified in the order.
(3) A banning order may include a provision allowing the person
against whom it was made, subject to any specified conditions:
(a) to do specified acts; or
(b) to do specified acts in specified circumstances;
that the order would otherwise prohibit them from doing.
Section 80 of the National Consumer Credit Protection Act 2009 (Cth) – ASIC’s
power to make a banning order
Making a banning order
(1) ASIC may, in writing, make one or more orders (
banning orders)
against a person:
(a) if ASIC suspends or cancels a licence of the person; or
(b) if the person becomes insolvent; or
(c) for a natural person—if the person is convicted of fraud; or
(d) if the person has:
(i) contravened any credit legislation; or
(ii) been involved in a contravention of a provision of any
credit legislation by another person; or
(e) if ASIC has reason to believe that the person is likely to:
(i) contravene any credit legislation; or
(ii) be involved in a contravention of a provision of any credit
legislation by another person; or
(f) if ASIC has reason to believe that the person is not a fit and
proper person to:
(i) engage in one or more credit activities; or
(ii) perform one or more functions as an officer (within the
meaning of the
Corporations Act 2001) of another person
who engages in credit activities; or
(ii ) control another person who engages in credit activities; or
(fa) if ASIC has reason to believe that the person is not adequately
trained, or is not competent, to:
(i) engage in one or more credit activities; or
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(ii) perform one or more functions as an officer (within the
meaning of the
Corporations Act 2001) of another person
who engages in credit activities; or
(ii ) control another person who engages in credit activities; or
(fb) if the person has, at least twice, been linked to a refusal or
failure to give effect to a determination made by AFCA (as
defined in section 910C of the
Corporations Act 2001) relating
to a complaint that relates to:
(i) credit activities; or
(ii) a financial services business (within the meaning of
the
Corporations Act 2001); or
(fc) if subsection (3) applies to the person in relation to 2 or more
corporations; or
(g) if a prescribed State or Territory order is in force against the
person; or
(h) in any other circumstances prescribed by the regulations.
(1A) Subsection (1) has effect subject to subsection (4).
When a person is not a fit and proper person
(2) For the purposes of paragraph (1)(f), ASIC must have regard to the
matters in section 37B.
When a person has been an officer of a corporation unable to pay
its debts
(3) This subsection applies to a person in relation to a corporation if,
within the last 7 years:
(a) the person was an officer (within the meaning of
the
Corporations Act 2001) of the corporation when the
corporation was:
(i) engaging in credit activities; or
(ii) carrying on a financial services business (within the
meaning of the
Corporations Act 2001); and
(b) the corporation was wound up either:
(i) while the person was such an officer of the corporation; or
(ii) within the 12 months after the person ceased to be such
an officer of the corporation; and
(c) a liquidator lodged a report under subsection 533(1) of
the
Corporations Act 2001 (including that subsection as
applied by section 526-35 of the
Corporations (Aboriginal and
Torres Strait Islander) Act 2006) about the corporation’s inability
to pay its debts.
Person to be given an opportunity to be heard
(4) Subject to subsection (5), if ASIC has not delegated its power to
make a banning order against a person to a Financial Services and
Credit Panel, ASIC may make the order only after giving the person
an opportunity:
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(a) to appear, or be represented, at a hearing before ASIC that
takes place in private; and
(b) to make submissions to ASIC on the matter.
Note: If ASIC delegates its power to make a banning order
against a person to a Financial Services and Credit Panel,
the panel may make the order only after holding a hearing
in relation to the proposed order (see section 157 of the ASIC
Act).
(5) ASIC may make a banning order against a person without giving
the person the opportunities mentioned in subsection (4) if:
(a) either:
(i) ASIC has not delegated its power to make the banning
order to a Financial Services and Credit Panel; or
(ii) ASIC exercises its power to make the banning order despite
such a delegation; and
(b) subsection (6) or (6A) applies.
Note: See section 34AB of the
Acts Interpretation Act
1901 (effect of delegation).
(6) This subsection applies if:
(a) ASIC’s grounds for making a banning order against a person
include that ASIC has suspended or cancelled a licence of the
person (see paragraph (1)(a)); and
(b) the suspension or cancellation took place without a hearing
under section 54.
(6A) This subsection applies if:
(a) ASIC’s grounds for making a banning order against a person
include that the person has been convicted of fraud (see
paragraph (1)(c)); and
(b) the person has been convicted of serious fraud.
Copy of banning order to be given to the person
(7) ASIC must give a copy of a banning order to the person against
whom it was made.
Section 81 of the National Consumer Credit Protection Act 2009 (Cth) – What a
banning order prohibits
(1) A banning order made against a person may specify that the person is
prohibited from doing one or more of the following:
(a) engaging in any credit activities;
(b) engaging in specified credit activities in specified
circumstances or capacities;
(c) controlling, whether alone or in concert with one or more other
entities (as defined by section 64A of the
Corporations Act
2001), another person who engages in credit activities;
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(d) performing any function involved in the engaging in of credit
activities (including as an officer (within the meaning of
the
Corporations Act 2001), manager, employee, contractor or
in some other capacity);
(e) performing specified functions involved in the engaging in of
credit activities.
(2) The banning order may specify that a particular prohibition
specified in the order applies against the person:
(a) if the sole ground for the banning order is because
paragraph 80(1)(fc) applies—for a specified period of up to 5
years; or
(b) otherwise—either permanently or for a specified period.
Note: This subsection applies separately to each prohibition
specified in the order.
(3) A banning order may include a provision allowing the person
against whom it was made, subject to any specified conditions:
(a) to do specified acts; or
(b) to do specified acts in specified circumstances;
that the order would otherwise prohibit them from doing.
(4) A banning order is not a legislative instrument.
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