The Financial Accountability Regime (FAR), the last final major Hayne royal commission recommendation, is set to commence after securing passage in the Senate last week.
Financial Services Minister Stephen Jones says FAR – which cleared the House of Representatives in March – will apply to the banking industry six months after Royal Assent and 18 months later to the insurance and superannuation industries.
FAR replaces and extends the Banking Executive Accountability Regime (BEAR) by imposing “tough new” accountability obligations on banks, insurers, and superannuation funds, Mr Jones said.
“The FAR ensures that these institutions clearly identify individuals who will be held accountable for the actions of the organisation.”
Under FAR an executive can be penalised with a loss of income, disqualification from working in the sector, and individual civil penalties for assisting in the organisation’s contravention of its obligations.
Law firm Minter Ellison says if FAR is given Royal Assent this month the regime will apply to the banking sector from March next year and the insurance and superannuation sectors from March 2025.
“The aim of the FAR is ultimately to strengthen and increase individual and entity level accountability across the financial services sector, including for non-financial conduct risk,” Minter Ellison says.
Gilbert + Tobin, another law firm, says under FAR all directors and most senior executives will be identified as accountable persons under the regime and be subject to broad obligations to, among other things, act with honesty and integrity and with due skill, care and diligence.
“They will be obliged to take reasonable steps to prevent material contraventions of specified financial services laws. This brings into sharper focus the adequacy of compliance arrangements,” Gilbert + Tobin says.
Aon Partner for Talent Solutions Annette Hang says stakeholder education and engagement can often be the “trickiest” part of the implementation process.
She says regulated entities will need to allow sufficient time to bring stakeholders on the journey.
“Clients often under-estimate the breadth of the regime. Getting the FAR mobilisation framework right within organisations will help to quickly establish responsibilities and accountabilities and foster collaboration across functions,” Ms Hang said.