XN000022-1975-10-24 — Page 4

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FRIDAY, OCTOBER 24, 1975

LEGISLATION PROPOSED FOR CONTROL OF DEPOSIT-TAKING COMPANIES

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PROPOSED LEGISLATION AIMED AT PROTECTING THE INTERESTS OF DEPOSITORS BY CONTROLLING THE OPERATIONS OF DEPOSIT- TAKING COMPANIES+ IS TO BE INTRODUCED INTO THE LEGISLATIVE COUNCIL SHORTLY.

THE LEGISLATION, WHICH FOLLOWS CLOSELY ALONG THE LINES ANNOUNCED BY THE FINANCIAL SECRETARY AT THE BEGINNING OF THE YEAR, WILL HAVE THE EFFECT OF CHANNELLING SMALL DEPOSITS INTO LICENSED BANKS.

UNDER THE BILL PUBLISHED TODAY, A BUSINESS INVOLVING THE TAKING OF DEPOSITS CAN ONLY BE CARRIED ON BY A COMPANY REGISTERED WITH THE COMMISSIONER OF BANKING.

LICENSED BANKS AND OTHERS WHICH ARE ALREADY SUBJECT TO SPECIFIC ORDINANCES, AND THOSE TAKING DEPOSITS IN SPECIAL CIRCUMSTANCES WHICH ARE INCIDENTAL TO THEIR MAIN ACTIVITIES, WILL BE EXEMPT FROM THE PROVISIONS OF THE BILL.

ONE OF THE MAIN CONDITIONS FOR REGISTRATION AS A DEPOSIT- TAKING COMPANY WILL BE THE REQUIREMENT THAT THE COMPANY'S ISSUED CAPITAL MUST BE AT LEAST $5 MILLION, OF WHICH AT LEAST $2.5 MILLION HAS BEEN PAID UP. BUSINESS ALREADY IN EXISTENCE WHEN THE LEGISLATION COMES INTO FORCE WILL BE ALLOWED TWO YEARS TO MEET THIS PROVISION.

THE MAXIMUM PENALTY FOR A PERSON WHO CARRIES ON THE BUSINESS OF TAKING DEPOSITS WITHOUT REGISTRATION IS A FINE OF $500,000 AND FIVE YEARS IMPRISONMENT.

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THE PROVISION THAT SEEKS TO PROTECT SMALL DEPOSITORS STIPULATES THAT REGISTERED DEPOSIT-TAKING COMPANIES CANNOT ACCEPT DEPOSITS SMALLER THAN $50,000. THUS THE ONLY PLACE FOR SUCH SMALL DEPOSITS WILL NORMALLY BE A LICENSED BANK.

THERE IS ALSO AN ANTI-AVOIDANCE+ PROVISION WHICH PREVENTS A NUMBER OF SMALL' DEPOSITS BEING POOLED TOGETHER TO FORM THE MINIMUM DEPOSIT FIGURE.

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LANGER DEPOSITORS WITH A DEPOSIT-TAKING COMPANY WILL BE IN A BETTER POSITION TO JUDGE THEIR OWN RISK, AND THE PROPOSED LEGISLATION WILL HELP IN THIS BY REQUIRING THE COMPANIES TO MAKE RECENT ACCOUNTS AVAILABLE FOR INSPECTION.

THIS FEE

UNDER THE BILL, A DEPOSIT-TAKING COMPANY WILL BE REQUIRED TO PAY A FEE OF $10,000 ON FIRST 'REGISTRATION. WILL ALSO BE CHARGED ON AN ANNUAL BASIS.

THE PROPOSED LEGISLATION ALSO PROVIDES FOR THE SETTING UP OF A DEPOSIT-TAKING COMPANIES ADVISORY COMMITTEE TO ADVISE THE GOVERNOR ON MATTERS RELATING TO THE BILL. THIS FUNCTION WILL BE SIMILAR TO THAT OF THE BANKING ADVISORY COMMITTEE.

/TWO OTHER PROVISIONS

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