The Australian Government has in recent months turned its spotlight on the performance of its regulators, with a focus on ensuring that regulators are fully performing their functions, and doing so in a transparent, effective and efficient manner. The Government's focus is evidenced by the recent establishment of the Financial Regulator Assessment Authority, and the introduction of the new Regulator Performance Guide, both of which occurred earlier this year.
Financial Regulator Assessment Authority
The Financial Regulator Assessment Authority Act 2021
The Financial Regulator Assessment Authority Act 2021 (Act), which came into effect on 1 July 2021, had its genesis in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission).
The Act gives effect to two of the 76 recommendations contained in the Royal Commission's final report, by establishing the Financial Regulator Assessment Authority (Authority), which is charged with assessing the effectiveness and capability of two of Australia's main financial regulators, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
The functions of the Authority
The Authority will be required to undertake assessments of the effectiveness and capability of both ASIC and APRA, and to report to the Minister on its findings, every two years. The Minister can request that the Authority's biennial assessments consider specific matters, and the reports that the Authority prepares detailing its findings will first be given to the relevant regulator for comment, before being provided to the Minister and tabled in Parliament.
In addition to the biennial assessment and reporting required to be carried out by the Authority under the Act, the Minister can also require the Authority to conduct ad-hoc assessments of the two regulators from time to time.
ASIC and APRA, and their members and staff, will be required to cooperate with the Authority in the conduct of its assessment and reporting functions under the Act, and such cooperation will include the regulators being required to provide information and documentation that is requested, and answer any questions asked, by the Authority.
Membership of the Authority
The Authority is made up of a Chair and two other members. In an announcement by the Treasurer on 10 September 2021, Mr Nicholas Moore, who is the former head of Macquarie Group, has been appointed as the Authority's inaugural Chair.
In making an appointment under the Act, the Minister is required to have regard to the person's experience, expertise and qualifications. It is clear from the announcement of Mr Moore's appointment that the Treasurer considers that Mr Moore's previous interactions with ASIC and APRA, and his extensive commercial experience, place him in good stead to serve as the Authority's first Chair.
Regulator Performance Guide
As part of the Australian Government's recent focus on regulator performance, 2021 has also seen the introduction of the Australian Government's comprehensive new Regulator Performance Guide (Guide), which came into effect on 1 July 2021.
The Guide applies to Commonwealth entities that perform regulatory functions (regulators). The Guide replaces the 2014 Regulator Performance Framework.
Principles of regulator best practice
The Guide details the Government's refreshed expectations for regulators by setting out principles of regulator best practice, which are:
- continuous improvement and building trust - this refers to regulators continuously improving their performance, capability and culture, with a view to increasing the Australian public's trust and confidence in regulators, and Australia's regulatory system;
- risk-based and data-driven - this is focused on regulators managing risks proportionately, whilst minimising the regulatory burden on those that they regulate, and on regulators utilising data and technology in performing their functions; and
- collaboration and engagement - this is concerned with regulators communicating in a transparent and responsive manner, and performing their regulatory functions in a modern and collaborative way. This contemplates that regulators will engage regularly, and meaningfully, with stakeholders.Notably, under the 2014 Regulator Performance Framework, regulators were required to prepare standalone performance reports which were to be externally validated by stakeholders. From 1 July 2021, this requirement no longer applies.
Notably, under the 2014 Regulator Performance Framework, regulators were required to prepare standalone performance reports which were to be externally validated by stakeholders. From 1 July 2021, this requirement no longer applies.
Instead, the Guide provides that regulators should report annually on how they have performed against the expectations set out in the Guide. However, this performance reporting should be incorporated into the reporting processes a regulator is required to follow under the Public Governance, Performance and Accountability Act 2013 (PGPA) and the Public Governance, Performance and Accountability Rule 2014. It is intended that such performance reporting will be contained in regulators' corporate plans and annual reports.
Rather than the Guide being prescriptive as to how regulators should account for, and report against, their performance, regulators are free to come up with their own performance measures.
Statements of expectations and intent
The Guide contemplates that guidance will also be provided to regulators through the development, and refreshing, of Ministerial Statements of Expectations. These Statements are to be issued by the relevant regulator's responsible Minister and are intended to provide the regulator with clarity regarding relevant government policies and objectives. Regulators will be required to provide Regulator Statements of Intent in response to Ministerial Statements of Expectations, which will detail how the relevant regulator intends to address and deliver on the expectations.
The Guide provides that as best practice, Secretaries and heads of regulators should work collaboratively with their responsible Ministers to develop Ministerial Statements of Expectations. The Guide also states that these Statements should be integrated into regulators' reporting under the PGPA, and should be made publicly available.
It is clear from these recent reforms that the Australian Government is committed to ensuring that Australia's regulators are fully performing their functions and, in doing so, are operating in a manner that promotes accountability and transparency.
It is hoped that this increased focus on regulators will contribute to Australia's regulatory system operating effectively and efficiently, and that this will contribute to the Australian public's ongoing confidence and trust in the regulatory system.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.