Following registration of the Financial Accountability Regime Minister Rules which prescribe information for inclusion in the Financial Accountability Regime (FAR) register of accountable persons, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have released final rules to support the financial services industry in implementing FAR.

The transition package includes:

• the Regulator rules;
• the Transitional rules, which prescribe information to be provided by authorised deposit-taking institutions (ADIs) in relation to their existing accountable persons under the Banking Executive Accountability Regime (BEAR) at the transition point to the FAR;
• descriptions of ADI key functions to assist banking entities in the allocation of key functions; and
• reporting form instructions to assist banking entities in providing the required information to APRA and ASIC.

Transition Timetable

The FAR will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025.

The majority of the obligations under FAR will apply to the banking industry from 15 September 2024.

BEAR deferred remuneration obligations continue to apply to ADIs until 15 September 2024 when the FAR deferred remuneration obligations will commence.

The Financial Accountability Regime will apply in full to the accountable entities in the insurance and superannuation industries from 15 September 2025.

Accountability statements provided to APRA under BEAR will automatically transition to become accountability statements under the Financial Accountability Regime.

Information for FAR register

The Financial Accountability Regime Act (Information for register) Regulator Rules 2024 require that the register of accountable persons must contain certain information for each accountable person under the Financial Accountability Regime Act 2023 (FAR Act).

The information is separated into six categories: commencement date, personal identification details, employment status, key functions information, reporting lines and suspension.

ADI Key Functions descriptions

The Regulators have issued a document that provides descriptions of each ADI Key Function referred to in the Financial Accountability Regime Act (Information for register) Regulator Rules 2024 and the Financial Accountability Regime (Consequential Amendments) Transitional Rules 2024 (the Rules).

The Regulators consider this ADI Key Function information to be critical to effectively administer the FAR as it provides visibility to the Regulators of which accountable persons (if any) have relevant responsibility for any applicable ADI Key Functions.

The Regulators have clarified that information regarding an ADI Key Function needs only be provided and will only be included in the FAR register if the ADI Key Function is undertaken by a relevant accountable entity and an accountable person (as defined in sections 10 and 11 of the FAR Act) has the relevant senior executive responsibility for that ADI Key Function.

Additionally, the Regulators have reduced the list of ADI Key Functions from 20 to 17.

The ADI Key Functions ‘financial services regulatory engagement’ and ‘risk culture’ have been removed, given submissions noted that these ADI Key Functions, if retained, would need to be allocated to most, if not all, accountable persons.

The ADI Key Functions on ‘monitoring representatives and staff’ and ‘training of relevant staff and representatives’ have been merged into one.

The Regulators acknowledge the privacy concerns of accountable persons and, in response, have removed from the Transitional rules the requirement to provide the following personal identification details: place of birth (town/city), country of birth, state of birth, former given names, former middle names, and former family names.

At this stage, the Regulators only intend to make information collected for the FAR register publicly available in circumstances where they disqualify an accountable person under the FAR Act.

The current intention is that the FAR disqualification register, which will be published on the Regulators’ websites, will only contain the name of the disqualified accountable persons and the scope of their disqualification, including any variation or revocation of a disqualification.

Relevant accountable entities are expected to know where senior executive responsibility for any ADI Key Functions undertaken by those entities lies as part of the processes and procedures that support compliance with their key personnel obligations under section 23 of the FAR Act.

The Regulator rules and Transitional rules do not require a relevant accountable entity to undertake each ADI Key Function specified in the list of ADI Key Functions or to ensure that an accountable person is assigned to each ADI Key Function.

If the accountable entity does not undertake an ADI Key Function, or an accountable person as determined under the FAR Act does not have the requisite level of responsibility for an ADI Key Function, it does not need to be allocated.

APRA and ASIC will next consult on the proposed key functions for insurance and superannuation entities.

Transitional Rules

The Financial Accountability Regime (Consequential Amendments) Transitional Rules 2024 prescribe:
(a) that certain information must be provided to the Regulators by authorised deposit-taking institutions (ADIs) which are subject to the BEAR and which become accountable entities under the FAR Act, to facilitate the transition of such ADIs from the BEAR to the FAR;
(b) the required timeframe for submission of that information; and
(c) the method of submission of that information.

The Information to be provided for transitioning accountable persons must be provided to the Regulator by 14 October 2024.

Accountable persons of entities in the banking industry will automatically have their registration transitioned from the Banking Executive Accountability Regime to the Financial Accountability Regime. This only applies where the person will continue to be an accountable person under the Financial Accountability Regime. While re-registration of accountable persons is not necessary, the transition from the Banking Executive Accountability Regime to the Financial Accountability Regime would most likely result in material changes to the details of the responsibilities of those accountable persons and the Regulator must be notified of any such changes.

Transitional arrangements for insurance and superannuation industries
The Financial Accountability Regime will apply in full to the accountable entities in the insurance and superannuation industries from 15 September 2025.

This will include the deferred remuneration obligations, which will apply to remuneration that was determined after the start of the first financial year after the Financial Accountability Regime applies to the insurance and superannuation industries.

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