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Banks and Deposit Companies Amendment Act 2012

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Banks and Deposit Companies Amendment Act 2012
FA E R
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AT F
TQUO U

BERMUDA

BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

2012 : 34

TABLE OF CONTENTS

Citation
Amends section 2
Amends section 9
Amends section 17
Amends section 20
Amends section 30
Inserts section 36A
Amends section 42
Inserts section 42A
Amends section 43
Amends section 44
Inserts sections 49A to 49M
Inserts section 55A
Inserts section 56A
Consequential amendments
Commencement

SCHEDULE 1

SCHEDULE 2
Amendment To The Banking Appeal Tribunal Regulations 2001

WHEREAS it is expedient to enhance the powers of the Bermuda Monetary
Authority under the Banks and Deposit Companies Act 1999 to effectively regulate the
banking industry in Bermuda and to meet appropriate international standards; to provide
for the imposition of civil penalties, the making of prohibition orders and other disciplinary
measures including injunctive relief; and to provide for the giving of notices in relation to
the exercise of disciplinary measures and for the publication of decisions of the Authority:

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2
3
4
5
6
7
8
9
10
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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

Be it enacted by The Queen’s Most Excellent Majesty, by and with the advice and
consent of the Senate and the House of Assembly of Bermuda, and by the authority of the
same, as follows:

Citation
This Act, which amends the Banks and Deposit Companies Act 1999 (the “principal

Act”), may be cited as the Banks and Deposit Companies Amendment Act 2012.

Amends section 2
Section 2 of the principal Act is amended by inserting in the appropriate

alphabetical order the following definitions—

“decision notice” means a notice prepared in accordance with section 49K;

“warning notice” means a notice prepared in accordance with section 49J.”.

Amends section 9
Section 9 (1) of the principal Act is amended—

in paragraph (b) by deleting “and” at the end thereof;

in paragraph (c) by deleting the period and substituting “; and”; and

by inserting the following paragraph after paragraph (c)—

in exercising its powers—

under section 49A to impose a civil penalty;

under section 49C to censure publicly;

under section 49E to make a prohibition order; and

under section 49M to publish information about any matter to
which a decision notice relates.”.

“(d)

(i)

(ii)

(iii)

(iv)

Amends section 17
Section 17 of the principal Act is amended by—

repealing subsection (5).

in subsection (6) by deleting “(whether or not constituting an offence under
subsection (5)”.

Amends section 20
Section 20 of the principal Act is amended—

in subsection (1), by deleting in the tailpiece “written notice of its intention
to do so” and substituting “a warning notice under section 49J”;

by repealing subsections (2) and (3);

1

2

3

(a)

(b)

(c)

4

(a)

(b)

5

(a)

(b)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

in subsection (4), by deleting the tailpiece and substituting “the Authority
shall give that person a copy of the warning notice but the Authority may
omit from such copy any matter which does not relate to him.”;

by inserting the following subsections after subsection (4)—

After giving a notice under subsection (1) and taking into account any
representations made under section 49J(2), the Authority shall decide—

whether to proceed with the action proposed in the notice;

whether to take no further action;

if the proposed action was to revoke the institution’s licence, to
restrict its licence instead; or

if the proposed action was to restrict the institution’s licence or to
vary the restrictions on a licence, to restrict it or to vary the
restrictions in a different manner.

Once the Authority has made a decision under subsection (4A) it shall
forthwith provide either a decision notice under section 49K or a notice of
discontinuance under section 49L, as the case may be.”;

“(4A)

(a)

(b)

(c)

(d)

(4B)

by repealing subsections (5) to (12) inclusive.

Amends section 30
Section 30 of the principal Act is amended—

in subsection (1) by inserting after the word “institution” the words “or
person”;

in subsection (1)(a) by deleting “or” at the end thereof;

in subsection (1)(b) by deleting the comma at the end and substituting “:
or”;

after subsection (1)(b) by inserting the following paragraphs—

to impose a civil penalty under section 49A; or

to publish a statement in respect of it pursuant to section 49C,”;

“(c)

(d)

by inserting the following subsections after subsection (3)—

Any person in respect of whom a prohibition order has been made
under section 49E, may appeal to the tribunal against the decision.

Any person in respect of whom a decision notice has been issued
refusing a revocation or variation of a prohibition order under section 49G(3) may
appeal to the tribunal.”;

“(3A)

(3B)

by repealing subsection (4) and substituting the following—

(c)

(d)

(e)

6

(a)

(b)

(c)

(d)

(e)

(f)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

The tribunal may suspend the operation of the decision appealed
against pending the determination of an appeal in respect of the decision.”.

“(4)

Inserts section 36A
The principal Act is amended by inserting the following section after section 36—

“Prudential and other returns
The Authority may make Rules prescribing statutory returns that must

be made by institutions.

Without prejudice to the generality of subsection (1), Rules may
prescribe—

capital adequacy returns;

liquidity returns;

large exposure returns;

foreign currency returns; and

annual returns of controllers and officers.

Every institution shall, not later than 28 days after the relevant day,
file with the Authority such returns as the Authority may prescribe in Rules made
under this section.

Every institution that fails to file a return within the time specified in
subsection (3) shall be liable to a civil penalty not exceeding $5,000 for each week
or part of a week that it is in default.

Sections 6, 7 and 8 of the Statutory Instruments Act 1977 shall not
apply to Rules made under this section.

In this section “relevant day” means such day as may be specified in
Rules made under this section.

The Schedules to the Rules made by the Authority under this section
shall be published separately on the website of the Authority: www.bma.bm, and
shall be available for inspection at the offices of the Authority.”.

36A (1)

(2)

(a)

(b)

(c)

(d)

(e)

(3)

(4)

(5)

(6)

(7)

Amends section 42
Section 42 of the principal Act is amended—

in subsection (2) by deleting the words “his investigation” and substituting
“the investigation he is appointed to carry out”;

in subsection (4)(a) by deleting the words “all documents relating to the
company concerned” and substituting “such documents, or documents of
such description, as may be specified, being documents the production of
which may be reasonably required for the investigation”;

7

8

(a)

(b)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

in subsection (4) by repealing paragraph (b) and substituting the
following—

to attend before the persons so appointed at such time and place
as they may require and answer questions relevant to the
investigation as such persons may require; and”;

“(b)

by inserting the following subsection after subsection (6)—

Unless the Authority otherwise directs, the institution under
investigation shall pay to the Authority all expenses of, and incidental to, the
investigation.”;

“(6A)

in subsection (8) by inserting after the word “him” the words “in criminal
proceedings”.

Inserts section 42A
The principal Act is amended by inserting the following section after section 42—

“Investigation of suspected contraventions
The Authority may conduct an investigation if it appears to the

Authority that—

a person may have contravened section 11;

an institution may have failed to comply with any requirements or
contravened any prohibition imposed by or under this Act,
Regulations, Rules or Orders made thereunder; or

an individual may not be a fit and proper person to perform
functions in relation to a regulated activity (within the meaning of
section 49E(9)).

The power conferred by subsection (1)(b) may be exercised in relation
to a company that was a former licensed deposit-taking business but only in
relation to—

business carried on at any time when the company was licensed
under this Act; or

the ownership or control of a company at any time when it was
licensed under this Act.”.

42A (1)

(a)

(b)

(c)

(2)

(a)

(b)

Amends section 43
Section 43 of the principal Act is amended by—

deleting the section heading and substituting the following—

“Power to require production of documents”;

by repealing subsection (1) and substituting the following—

(c)

(d)

(e)

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10

(a)

(b)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

The Authority may by notice in writing require the person who is the
subject of an investigation under section 42A (“the person under investigation”) or
any person connected with the person under investigations—

to provide, at such place as may be specified in the notice and
either forthwith or at such time as may be so specified, such
information as the Authority may reasonably require for the
purpose of the investigation;

to produce, at such place as may be specified in the notice and
either forthwith or at such time as may be so specified, such
documents, or documents of such description, as may be
specified, being documents the production of which may be
reasonably required for the investigation;

to attend at such place and time as may be specified in the notice
and answer questions relevant to the investigation as the
Authority may require.”

“(1)

(a)

(b)

(c)

by inserting the following subsection after subsection (1)—

The Authority may by notice in writing require every person who is or
was a director, controller, senior executive, employee, agent, banker, accountant,
auditor or barrister and attorney of a person under investigation—

to produce to the Authority, within such time and at such place as
the Authority may require, such documents, or documents of such
description, as may be specified, being documents the production
of which may be reasonably required for the investigation which
are in his custody or power;

to attend before the Authority at such time and place as the
Authority may require and answer questions relevant to the
investigation as the Authority may require; and

to take such actions as the Authority may direct in connection with
the investigation.”;

“(1A)

(a)

(b)

(c)

by inserting the following subsection after subsection (6)—

For the purposes of this section, a person is connected with the person
under investigation if such person is or has at any relevant time been—

a member of the group of the person under investigation;

a controller of the person under investigation;

a partner of a partnership of which the person under investigation
is a member.”.

“(7)

(a)

(b)

(c)

Amends section 44
Section 44 of the principal Act is amended—

(c)

(d)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

in subsection (1) by deleting the words beginning with “laid by” and ending
with “section 43”, and substituting “that the Authority is conducting an
investigation under section 42A”;

by repealing subsection (1)(a) and substituting the folowing—

that a person has failed to comply with a notice served on him
under section 43;”;

“(a)

in subsection (2)(a) by deleting the words “the person mentioned in
subsection (1)” and substituting “the person referred to in subsection (1)
(a).”

in subsection (4) by repealing paragraph (b) and substituting the
following—

until the conclusion of proceedings, if within the period of three
months referred to in paragraph (a) proceedings to which the
documents are relevant are commenced against any person for
any such contravention as is mentioned in section 42A.”.

“(b)

Inserts sections 49A to 49M
The principal Act is amended by inserting after section 49 the following—

“DISCIPLINARY MEASURES

Power to impose civil penalties for breach of requirements
Except as provided in sections 16 and 36A, every person who fails to

comply with any requirement or contravenes any prohibition imposed by or under
this Act shall be liable to a penalty not exceeding $500,000, as the Authority
considers appropriate, for each such failure or contravention.

For the purposes of subsection (1), “appropriate” means effective,
proportionate and dissuasive.

The Authority shall not impose a penalty under subsection (1) where
it is satisfied that the person concerned took all reasonable steps and exercised all
due diligence to ensure that the requirement would be complied with.

Civil penalties procedures
If the Authority proposes to impose a civil penalty, it must give the

person concerned a warning notice.

If the Authority decides to impose a civil penalty, it must give the
person concerned a decision notice.

49A (1)

(2)

(3)

49B (1)

(2)

(a)

(b)

(c)

(d)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

Public censure
If the Authority considers that an institution has contravened a

requirement imposed on it by or under this Act, the Authority may publish a
statement to that effect.

After a statement under this section is published, the Authority shall
send a copy of it to the institution.

Public censure procedure
If the Authority proposes to publish a statement in respect of an

institution under section 49C, it must give the institution a warning notice.

If the Authority decides to publish a statement under section 49C
(whether or not in the terms proposed), it must give the institution concerned a
decision notice.

Prohibition orders
Subsection (2) applies if it appears to the Authority that an individual

is not a fit and proper person to perform functions in relation to a regulated activity
carried on by a person who is licensed by the Authority under this Act (‘a regulated
person’).

The Authority may make a prohibition order prohibiting the individual
from performing a specified function, any function falling within a specified
description, or any other function.

A prohibition order may relate to—

a specified regulated activity, any regulated activity falling within
a specified description, or all regulated activities;

regulated persons generally, or any person within a specified class
of regulated persons.

In exercising its discretion to make a prohibition order under
subsection (2), the Authority must have regard (among other things) to such
factors, including assessment criteria as the Authority may establish in a statement
of principles.

An institution must ensure that no function performed in relation to
the carrying on of a regulated activity, is performed by an individual who is
prohibited from performing that function by a prohibition order.

The Authority may, on the application of the individual named in a
prohibition order, vary or revoke the prohibition order.

The Authority must publish a prohibition order that is in effect, and
every variation of such order, in such manner as it considers appropriate to bring
the order to the attention of the public.

49C (1)

(2)

49D (1)

(2)

49E (1)

(2)

(3)

(a)

(b)

(4)

(5)

(6)

(7)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

Any person who fails to comply with the terms of a prohibition order
commits an offence and is liable—

on summary conviction to a fine of $50,000 or to imprisonment for
two years or to both;

on conviction on indictment to a fine of $200,000 or to
imprisonment for four years or to both.

In this section—

“regulated activity” means any activity that is carried on by way of business
requiring licensing by the Authority under any provision of this Act;

“regulated person” has the meaning given in subsection (1);

“specified” means specified in the prohibition order.

Prohibition orders: procedures
If the Authority proposes to make a prohibition order it must give the

individual concerned a warning notice.

If the Authority decides to make a prohibition order it must give the
individual concerned a decision notice.

Applications relating to prohibition orders: procedures
This section applies to an application for the variation or revocation of

a prohibition order.

If the Authority decides to grant the application, it must give the
applicant written notice of its decision.

If the Authority decides to refuse the application, it must give the
applicant a decision notice.

Determination of applications for variation etc.
The Authority may grant an application made under section 49G if it

is satisfied that the applicant is a fit and proper person to perform the function to
which the application relates.

In deciding that question, the Authority may have regard (among other
things) to whether the applicant—

has obtained a qualification;

has undergone, or is undergoing, training; or

possesses a level of competence,

required in relation to persons performing functions of the kind to which the
application relates.

(8)

(a)

(b)

(9)

49F (1)

(2)

49G (1)

(2)

(3)

49H (1)

(2)

(a)

(b)

(c)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

Injunctions

Injunctions
If, on the application of the Authority, the Court is satisfied—

that there is a reasonable likelihood that any person will
contravene a relevant requirement; or

that any person has contravened a relevant requirement and that
there is a reasonable likelihood that the contravention will
continue or be repeated,

the Court may make an order restraining the contravention.

If, on the application of the Authority, the Court is satisfied—

that any person has contravened a relevant requirement; and

that there are steps which could be taken for remedying the
contravention,

the Court may make an order requiring that person, and any other person who
appears to have been knowingly concerned in the contravention, to take such steps
as the court may direct to remedy it.

If, on the application of the Authority, the Court is satisfied that any
person may have—

contravened a relevant requirement; or

been knowingly concerned in the contravention of such a
requirement,

the Court may make an order restraining such person from disposing of, or
otherwise dealing with, any of his assets which it is satisfied the person is
reasonably likely to dispose of or otherwise deal with.

In subsection (2), references to remedying a contravention include
references to mitigating its effect.

"Relevant requirement" in relation to an application by the Authority,
means a requirement which is imposed by or under this Act.

Notices

Warning notices
A warning notice must—

state the action which the Authority proposes to take;

be in writing; and

give reasons for the proposed action.

49I (1)

(a)

(b)

(2)

(a)

(b)

(3)

(a)

(b)

(4)

(5)

49J (1)

(a)

(b)

(c)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

The warning notice must specify a reasonable period (which may not
be less than 14 days) within which the person to whom it is given may make
representations to the Authority; and where such representations are made the
Authority shall take them into account in deciding whether to give a decision notice.

The Authority may extend the period specified in the notice.

A warning notice given under section 20 proposing action within
subsection (1)(a) or (1)(b) of that section must specify the proposed restriction or,
as the case maybe, the proposed variation.

A warning notice about a proposal to publish a statement given under
section 49D must set out the terms of the statement.

A warning notice given under section 49F(1) must set out the terms of
the prohibition.

Decision notices
A decision notice must—

be in writing;

give reasons for the Authority’s decision to take the action to which
the notice relates;

give its decision; and

give an indication of the right to appeal the decision to the appeal
tribunal under section 30.

A decision notice shall be given within 90 days beginning with the day
on which a warning notice under section 49J was given; and if no decision notice
under subsection (1) is given within that period, the Authority shall be treated as
having at the end of that period given a notice of discontinuance under section 49L.

A decision notice under section 20(4B) imposing a restriction or
variation shall set out the terms of the restriction or variation.

A decision notice about the imposition of a civil penalty under section
49A must state the date of payment.

A decision notice about public censure under section 49C must—

set out the terms of the statement;

give details of the manner in which, and the date on which, the
statement will be published.

A decision notice about a prohibition order made under section 49F
must—

name the individual to whom the prohibition order applies;

set out the terms of the order; and

(2)

(3)

(4)

(5)

(6)

49K (1)

(a)

(b)

(c)

(d)

(2)

(3)

(4)

(5)

(a)

(b)

(6)

(a)

(b)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

be given to the individual named in the order.

A decision notice shall state the day on which it is to take effect.

The Authority may, before it takes the action to which a decision notice
(“the original notice”) relates, give the person concerned a further decision notice
which relates to different action in respect of the same matter.

The Authority may give a further decision notice as a result of
subsection (8) only if the person to whom the original notice was given consents.

If the person to whom a decision notice is given under subsection (1)
had the right to refer the matter to which the original decision notice related to the
tribunal, he has that right as respects the decision notice given under subsection
(8).

Conclusion of action

Notices of discontinuance
Subject to section 49K(2), if the Authority decides not to take the action

proposed in a warning notice it must give a notice of discontinuance to the person
to whom the warning notice was given.

A notice of discontinuance must identify the action which is being
discontinued.

Publication

Publication
Subject to sections 20, 49C and 49E, the Authority may publish such

information about a matter to which a decision notice relates as it considers
appropriate.

The Authority must not publish a decision under subsection (1)—

before notifying the person concerned; and

pending an appeal under section 30.”.

(c)

(7)

(8)

(9)

(10)

49L (1)

(2)

49M (1)

(2)

(a)

(b)

Inserts section 55A
The principal Act is amended by inserting the following section after section 55—

“False documents or information
Any person who, for any purposes of this Act—

issues a document, or supplies information, which is false or
misleading in a material respect; or

signs a document which is false or misleading in a material
respect; or

55A (1)

(a)

(b)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

takes part in the preparation or issue of a document, or the
supplying of information, which is false in a material respect,

commits an offence.

A person who commits an offence under subsection (1) is liable—

on summary conviction to a fine of $50,000 or to imprisonment for
two years or to both;

on conviction on indictment to a fine of $200,000 or to
imprisonment for four years or to both.

It shall be a defence for a person charged with an offence under
subsection (1) to prove—

if an individual, that he had no knowledge of the falsity or
misleading character of the document or information, and took
every reasonable precaution to ensure its accuracy; and

if not an individual, that every person acting on his behalf had no
such knowledge, and took every such reasonable precaution, as
aforesaid.”.

(c)

(2)

(a)

(b)

(3)

(a)

(b)

Inserts section 56A
The principal Act is amended by inserting the following section after section 56—

“Civil debt and civil penalties
When a person is convicted of an offence under this Act, such person

shall not also be liable to a civil penalty imposed by or under section 49A in relation
to the same matter.

A civil penalty levied pursuant to this Act may be recovered by the
Authority as a civil debt.”.

56A (1)

(2)

Consequential amendments
Schedules 1 and 2 (which make consequential amendments) have effect.

Commencement
This Act shall come into operation on such day as the Minister may appoint by

notice published in the Gazette and the Minister may appoint different days for different
provisions.

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15

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

SCHEDULE 1

(section 15)

1 The following provisions of the principal Act are repealed—

(a) section 16(4);

(b) section 35(3);

(c) section 36(3), (4) and (5);

(d) section 37;

(e) section 38(9) and (10);

(f) section 47(4);

(g) section 50(2); and

(h) section 63(4).

2 The Second Schedule to the principal Act (Minimum Criteria for Licensing) is
amended—

(a) in paragraph 1(1) by deleting the words “hold the particular
position which he holds or is to hold” and substituting the words
“perform functions in relation to any activity carried on by the
institution”;

(b) by inserting after paragraph 1 the following—
“CORPORATE GOVERNANCE

1A (1) The institution shall implement corporate governance
policies and processes as the Authority considers appropriate
given the nature, size, complexity and risk profile of the institution.
(2) Without prejudice to subparagraph (1) the business of an
institution shall be—

(a) effectively directed by at least two individuals; and
(b) under the oversight of such number of non-

executive directors appointed as the Authority
considers appropriate given the nature, size,
complexity and risk profile of the institution.";

(c) by repealing paragraphs 2 and 3; and
(d) in paragraph 4 by inserting after subparagraph (9) the following—

“ (10) In determining whether an institution is conducting its
business in a prudent manner, the Authority shall take into
account any failure by the institution to comply with the
provisions of—

(a) this Act;

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

(b) any other law, including provisions of the law
pertaining to anti-money laundering and anti-
financing of terrorism as provided in the Proceeds
of Crime Act 1997, the Anti-Terrorism (Financial
and Other Measures) Act 2004 and the Proceeds of
Crime (Anti-Money Laundering and Anti-Terrorist
Financing) Regulations 2008; and

(c) international sanctions in force in Bermuda.”.

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

SCHEDULE 2

(section 15)

AMENDMENT TO THE BANKING APPEAL TRIBUNAL REGULATIONS 2001

Amends regulation 3
Regulation 3 of the Banking Appeal Tribunal Regulations 2001 (the “principal

Regulations”) is amended—

in paragraph (a) by deleting the words “serves notice in writing on the
appellant of its decision” and substituting “gives a decision notice to the
appellant”;

in paragraph (c) by deleting the words “serves notice in writing on the
appellant of its decision.” and substituting “gives a decision notice to the
appellant.”.

Amends Schedule
Paragraph 1 of the Schedule to the principal Regulations is amended—

in subparagraph (a) by deleting the words “a notice served under section
20(1) or 20(4)” and substituting “the warning notice given under section
49J”;

in subparagraph (b) by deleting “20 (5)” and substituting “49J (2)”;

in subparagraph (c) by deleting the words “a decision notice served under
section 20 (7)” and substituting “the decision notice given under section
49K (2)”;

by deleting subparagraph (d).

Paragraph (2)(a) of the Schedule to the principal Regulations is amended by
deleting “or 20(4)”.

The principal Regulations are amended by inserting after paragraph 4 the
following paragraphs—

“5 In the case of an appeal against a decision of the Authority to impose
a civil penalty—

(a) a copy of the warning notice given under section 49B(1) of
the Act;

(b) a copy of the decision notice given under section 49B(2) of
the Act; and

(c) a copy of any written representations made in accordance
with section 49J(2) thereof.

6 In the case of an appeal against a decision of the Authority to publish
a statement in respect of an institution—

1

(a)

(b)

2 (1)

(a)

(b)

(c)

(d)

(2)

(3)

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BANKS AND DEPOSIT COMPANIES AMENDMENT ACT 2012

(a) a copy of the warning notice given under section 49D(1) of
the Act;

(b) a copy of the decision notice given under section 49D(2) of
the Act; and

(c) a copy of any written representations made in accordance
with section 49J(2) thereof.

7 In the case of an appeal against a decision of the Authority to make
a prohibition order—

(a) a copy of the warning notice given under section 49F(1) of
the Act;

(b) a copy of the decision notice given under section 49F(2) of
the Act; and

(c) a copy of any written representations made in accordance
with section 49J(2) thereof.

8 In the case of an appeal against a decision of the Authority to refuse
to revoke or vary a prohibition order a copy of the decision notice given
under section 49G(3) thereof.”.

[Assent Date: 08 August 2012]

[Operative Date: 19 September 2012]

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