The Financial Accountability Regime draft bill (FAR Bill) was introduced into the House of Representatives on Thursday 28 October.
The FAR Bill will impose a number of obligations on regulated entities, including as follows:
- Accountability obligations— which require entities in the banking, insurance and superannuation industries (accountable entities) and their directors and most senior and influential executives to conduct their business in a certain manner (i.e., honestly and with care, skill and diligence);
- Key personnel obligations—accountable entities must nominate senior and influential executives to be responsible for all areas of their business operations;
- Deferred remuneration obligations—accountable entities must defer at least 40 per cent of the variable remuneration of their directors and most senior and influential executives for a minimum of 4 years, and reduce their variable remuneration for non-compliance with their accountability obligations; and
- Notification obligations, requiring all accountable entities to meet the core notification obligations by providing the Regulator with certain information about their business and their directors and most senior and influential executives, and for entities above a certain threshold, also by preparing and submitting accountability statements and accountability maps.
The FSC notes that the FAR Bill is substantially the same as the exposure draft circulated for public consultation in July 2021, although there have been a number changes including (a) imposing legal obligations on auditors and actuaries to assist APRA with investigations, (b) imposing accessorial liability on accountable persons in certain circumstances, and (c) allowing the regulator to publicly disclose certain details of the register of accountable persons in the interests of public accountability and transparency.
In addition to the FAR Bill, industry can also expect to be consulted on draft Regulatory Rules and Ministerial Rules in the coming months. These Rules will provide much of the detail and specifics required to fully implement the FAR Bill.
APRA and ASIC are also expected to publish joint guidance on how the new regime will be administered.
In terms of timing, the FAR is expected to apply to the banking industry from 1 July 2022. The Banking Executive Accountability Regime (BEAR) will be repealed as the obligations under the Financial Accountability Regime apply to the banking industry. The FAR is expected to apply to the insurance and superannuation industries from 1 July 2023.
The FSC will continue to monitor the progress of the FAR Bill and related Rules and Guidance and liaise with industry and regulators on an effective implementation process.
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