Super trustee scrutiny expected as FAR passes Parliament

Parliament has passed the Financial Accountability Regime (FAR), a recommendation from the Hayne royal commission.

This will replace the Banking Executive Accountability Regime (BEAR) and impose stricter accountability obligations on superannuation funds as well as banks and insurers.

It will apply to the registrable super entities (RSEs) 18 months after it receives royal assent.

A joint consultation had been opened by ASIC and APRA in July in order to support its implementation.

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Individuals must be identified who are accountable for the actions of the organisation and analysis should be conducted to identify where there are any ‘significant related entities’ of the accountable entity which may include offshore entities.

Accountability statements should be prepared with a statement of their responsibilities and a reasonable steps framework developed to build an evidence base on how the accountable entities are discharging their obligations. 

An executive who breaches their obligations can be penalised with loss of income, disqualification, and individual civil penalties. It is understood the threshold for breaches is lower than under the BEAR regime and accountable entities must notify regulators within 30 days of having reasonable grounds to believe the entity or person has breached their obligations.

Minister for Financial Services, Stephen Jones, said: “Financial services executives make decisions that impact upon the lives of all Australians. They must be held to high standards of accountability and integrity.”

Responding to the news, the Financial Services Council (FSC) said: “The FSC welcomes the certainty brought by the assent of the Financial Accountability Regime Bill 2023 which will introduce a new accountability regime for the banking, insurance and superannuation industries.
  
“The FSC looks forward to working with stakeholders including APRA, ASIC and other industry bodies to implement the new legislation.”

Financial law firm, Gilbert and Tobin, said: “Implementing FAR in a proportionate manner, using the right skills and experience will have a positive overall impact on an accountable entity. It will protect directors and executives and assist in the proper functioning of accountable entities. 

“Clients who have been subject to BEAR and those clients who have already pre-emptively implemented the regime are overwhelmingly positive about the benefits that have been realised from doing so.”