iOn 15 March 2024 the Financial Accountability Regime (FAR) came into effect for authorised-deposit taking institutions (ADIs). Application of the FAR will be extended to insurers and registrable superannuation entities from 15 March 2025.
New Guidance
On 14 March 2024, the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investments Commission (ASIC) released an information package which included:
- An overview of the FAR, including information on obligations imposed on entities and their accountable persons;
- An updated accountability statement guide and template for entities with enhanced notification obligations;
- Detailed instructions for the reporting of FAR breaches; and
- A consultation relevant to insurance and superannuation entities.
FAR Obligations
Under the FAR, entities will be required to comply with a range of accountability, key personnel, notification, and deferred remuneration obligations. Any obligation imposed on an entity under the FAR will also extend to any ‘significant related entity’.
The accountability obligations require entities to conduct their business with honesty, integrity and due care, skill and diligence. Accountable entities must also be transparent and cooperative when dealing with APRA and ASIC (together, the Regulators). An accountable person has similar accountability obligations. Under the key personnel obligations, an entity must ensure that all relevant prescribed roles and responsibilities, including any applicable key business functions, are assigned to an accountable person.
All accountable entities will be required to comply with the core notification obligations. These require accountable entities to notify the Regulators of certain events impacting the entity’s accountability framework and suspected FAR breaches. Additional notification obligations exist for entities meeting the enhanced notification thresholds.
The deferred remuneration obligations require an accountable entity to defer at least 40% of an accountable person’s variable remuneration for a minimum of four years unless an exemption applies. Where an accountable person fails to comply with their FAR obligations, their variable remuneration must be reduced.
Accountability Statements
Under the FAR, accountable entities meeting the enhanced notification threshold are required to provide the Regulators with an accountability statement for each of its accountable persons. The recently published accountability statement guidance includes a template and details about the minimum information to be included in an accountability statement.
Reporting Form Instruction Guides
Under the FAR, accountable entities are required to report certain information to the Regulators. To assist entities in fulfilling their reporting obligations appropriately, the Regulators have released a series of instruction guides for:
- Providing entity profile information;
- Submitting an accountability map;
- Registering an accountable person;
- Notifying the Regulators of a change to an accountable person; and
- Reporting a breach.
Each instruction guide includes an approved template as well as instructions on how the form is to be completed.
Insurers and superannuation entities
The FAR legislation is accompanied by Minister’s Rules and Regulator Rules. The Regulators have commenced a joint consultation process on proposed amendments to the Regulator Rules and draft descriptions of key functions for insurers and superannuation entities. The consultation process ends on 19 April 2024.
