Yesterday, the Federal Government introduced the Financial Accountability Regime Bill 2022 (Cth). The Bill reintroduces the Financial Accountability Regime Bill 2021 (Cth), which was introduced by the previous Government but lapsed with the calling of the federal election in April. The new Bill is identical to the previous iteration (with the exception of new commencement dates). Its purpose: to implement a number of recommendations from the Financial Services Royal Commission and impose personal accountability across the financial services industry.
In summary, the Bill introduces a new accountability regime for the banking, insurance and superannuation industries. The regime is designed to improve the risk and governance cultures of financial institutions by imposing a strengthened responsibility and accountability framework for those institutions and the directors and the most senior and influential executives (accountable persons) of those institutions.
If passed, the regime will apply to the banking industry six months after commencement, and to insurance and superannuation industries 18 months after commencement.
Broad principles-based obligations will apply to financial services firms and accountable persons e.g. regulated entities and accountable persons must take reasonable steps to act with ‘honesty, integrity, and with due care, skill and diligence’.
While there is no explicit personal liability in a financial sense, disqualification penalties and civil penalties remain.
Certain entities are required to defer at least 40 per cent of the variable remuneration (e.g. bonuses and incentive payments) of their directors and most senior and influential executives for a minimum of four years. Variable remuneration must also be reduced for non-compliance with accountability obligations.
Accountability Maps and Accountability Statements must be ready to go at commencement of the regime. You must also demonstrate ‘reasonable steps’ and proactive compliance by accountable persons and entities.
Areas to work through: significant related entities, diffused corporate structures and interpretational points on conduct obligations.
Financial Accountability Regime – Key Facts
FAR Out – The reintroduction of civil penalties
BEAR (now FAR) – the extension of the Banking Executive Accountability Regime
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Matthew Bode, Partner
Taylor Green, Associate
Irene Gallagher, Solicitor