In July 2023, ASIC and APRA released key materials for consultation, to support the implementation of the Financial Accountability Regime (FAR) by the financial services industry. This included the proposed Regulator Rules and the 'Key Functions' descriptions for ADIs (Consultation Documents).
Our team has made a formal submission on this consultation.
While we welcome the proposal to provide greater clarity on the operation of FAR, there are some aspects of the Consultation Documents on which we wish to comment. We are concerned that several aspects of the Consultation Documents will lead to unintended consequences with respect to the operation of the FAR. In particular, our submission is focussed on the Key Functions.
If you would like to read a copy of our full submission, download a copy here.
In summary, HSF makes the following submissions:
- The concept of Key Functions should be removed from the
proposed Regulator Rules as there is a real risk that its inclusion
creates the unintended effect of expanding the list of accountable
persons and/or the scope of their responsibilities and is not
aligned with the policy intent previously communicated by Treasury,
including as reflected in the Explanatory Statement to the exposure
draft of the Financial Accountability Regime Minister Rules
2022 (Minister Rules).
- While our recommendation is that the Key Functions information
be removed from the registration requirements in Rule 5 of the
proposed Regulator Rules, if they are retained, the Key Functions
should be amended to make it explicit that they are only intended
to cover senior executive responsibility and not the execution,
maintenance or primary conduct of the relevant functions.
- The Key Functions information should not be included in the
register established under section 40 of the Financial
Accountability Regime Bill 2023 (Cth) (FAR
Bill) as information of this kind is already captured by
the core and enhanced notification obligations of accountable
entities. Further guidance about what triggers a material change
notification in relation to the Key Functions information will be
necessary if this information is retained in the register.
- The Regulators should adopt the approach to key functions taken
in implementing the BEAR, at least in respect of ADIs who are
subject to the BEAR, including to mitigate against unnecessary
regulatory burden.
- The Regulators should issue a joint regulatory guidance note
which includes guidance on responsibilities to be allocated in
practice to accountable persons and remove the requirement to
allocate Key Functions and register accountable persons for each
Key Function.
- The Regulators should re-visit the purpose of the Key Functions
information and consider whether the information is appropriate in
circumstances where accountable entities with enhanced notification
obligations are already required to provide comprehensive
information of the type sought by the Key Functions list (under the
requirements for those entities to prepare and lodge accountability
statements and accountability maps). In view of this, one approach
open to the Regulators is to retain the prescription of the Key
Functions information under Rule 5 of the Regulator Rules, but only
for accountable entities that are not subject to enhanced
notification requirements and therefore not required to prepare
accountability statements and accountability maps.
- The Regulators should clarify how the Regulator Rules, and if retained, the Key Functions document, are intended to be used and relied upon by the Regulators.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.