The Federal Government introduced the Financial Accountability Regime Bill 2022 (Cth) (FAR 2022) on 8 September 2022. The Bill reintroduces the Financial Accountability Regime Bill 2021 (Cth) (FAR 2021), which lapsed with the calling of the federal election in April 2022.
The Financial Accountability Regime (FAR) will be the most consequential change to the financial services regulatory framework in a generation, vastly expanding executive and director personal liability under broad principles-based conduct obligations. For more detail, see our past FAR resources here.
FAR 2022 has removed FAR 2021’s anticipated prescribed responsibility of end-to-end product responsibility (End-to-End Rule). This is set out in the Minister’s Rules, as opposed to legislation. Save for the start dates, there are no other material changes we have identified, although the ancillary liability provisions remain.
The FAR 2021 Policy Proposal Paper outlined that the End-to-End Rule was a prescribed responsibility for an Accountable Person. It sought to strengthen ‘the governance arrangements that aim to ensure that the product value chain is managed in a holistic manner rather than disaggregated into its stages’.
‘Given the aim of end-to-end product responsibility is to ensure that the product value chain is managed in a holistic manner, a broad interpretation of what is within the scope of end-to-end product responsibility is retained, including:
In August 2021, Gadens lobbied the Federal Government against the inclusion of the End-to-End Rule in FAR 2021. Gadens and its clients were concerned with the unrealistic responsibility the End-to-End Rule created, given the number of products on offer at most financial services institutions and the breadth of responsibilities in the product lifecycle e.g. technology, product design, remediation, etc. Gadens is pleased that this requirement has not been included in FAR 2022.
FAR 2022 is nearly identical to FAR 2021, save for start dates. The only major change is the removal of the End-to-End Rule from FAR 2022. The product value chain does not need to be managed in a holistic manner by only one Accountable Person. It can be disaggregated among Accountable Persons.
Many financial institutions have started their FAR implementations based off FAR 2021. Therefore, given the change made to FAR 2022, they may now redistribute the End-to-End Rule responsibilities from their Accountability Statement(s).
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Matthew Bode, Partner
Sinead Cronin, Solicitor