In TMeffect Pty Limited and Australian Prudential Regulation Authority [2017] AATA 921 the Administrative Appeals Tribunal of Australia consented to the use of the restricted word ‘bank’ in the proposed name ‘Bankrolla’ for a crowd-sourced funding intermediary.

The Tribunal criticised APRA Guidelines: Implementation of section 66 of the Banking Act 1959 for not allowing for context in the exercise of its discretion to consent to use of “bank” in relation to a financial business.

The Tribunal Deputy President concluded that there is little risk that the public will be confused into thinking the applicant is a bank if it is permitted to use the name ‘Bankrolla’.

APRA had rejected the application by a company to change its name to Bankrolla Pty Limited and carry on business under that name as a crowd-sourced funding intermediary.

In the absence of consent from APRA, it is an offence to assume or use the word ‘bank’ in relation to a financial business: subsections 66(1) and (4) of the Banking Act 1959 (Cth).

The applicant is not an ADI and it does not want to become one but it accepted, and the Tribunal found, that its proposed activity of operating as a crowd-sourced funding intermediary will have it carrying on a financial business.

APRA’s Guidelines state:

” … APRA is of the view that the assumption or use of restricted words by non-ADIs is inherently confusing and likely to mislead potential customers. Therefore, in accordance with the purpose of the restriction, APRA is unlikely to grant consent to financial businesses that are not regulated in Australia or overseas as ADIs except in exceptional circumstances.”

Deputy President S E Frost said:

“…the Guideline has re-cast the statutory question from (implicitly) ‘Would the public be protected if the assumption or use of the restricted word were permitted?’ to ‘Since the assumption or use of the restricted word will give rise to confusion, are there exceptional circumstances to warrant consent?’ The Guideline, in my view, provides an unsafe guide to the proper exercise of the discretion….

I would need little persuasion to conclude that if a non-ADI were permitted to call itself The Bank of X, or The X Bank, or X Banking Corporation, then the public could very easily be confused into thinking that the entity was a bank. I would not be likely to grant consent in those circumstances. I doubt that any reasonable decision-maker would….

the word ‘bankroll’, as a verb, has an accepted common meaning: the definition provided by the Macquarie Online Dictionary is ‘to provide funds for; act as backer for’. That meaning has a particular resonance in the industry sector the applicant wants to operate in, which is the crowd-sourced funding sector….

The business will undoubtedly involve the receipt and payment of money. That is something that banks do. But the applicant proposes to undertake those activities only under the newly created, well-defined, and heavily controlled crowd-sourced funding (CSF) regime in the new Part 6D.3A of the Corporations Act 2001. That tells me that people who are likely to engage with the applicant will be people who want to take advantage of that regime; even the most ill-informed of them are likely to see the applicant as a CSF intermediary (as it will hold itself out in the marketplace) rather than as a bank….

The essential question for determination is whether the objective of protecting the public would be undermined by the granting of consent to the assumption and use of the name ‘Bankrolla’. In considering that question I must obviously put aside the issue of the inherent riskiness of equity crowdfunding – because that inherent riskiness remains no matter what the applicant chooses to call itself. The inherent riskiness of the activity is plainly an irrelevant consideration for the purposes of the essential question I have identified.

Instead the focus must be on whether the public might be confused into thinking the applicant is actually a bank, with the same level of capital adequacy, depositor-priority and other prudential requirements that apply to ADIs: Guideline..

Making proper allowance for the wide range of people who may end up being within the ‘likely audience’, I am comfortably satisfied that there is little risk that the public will be confused into thinking the applicant is a bank if it is permitted to use the name ‘Bankrolla’. The word ‘bankroller’ is not suggestive of banking activity, its somewhat playful adaptation ‘bankrolla’ even less so. Only the quite unusually stupid would think a business with that name satisfies the same level of capital adequacy, depositor-priority and other prudential requirements that apply to ADIs.”