In January last year, Treasury released its proposal paper on extending BEAR to all APRA-regulated entities, with the new scheme to be called the Financial Accountability Regime (FAR).
The expansion of the regime was recommended by the final report from the royal commission.
While the FSC has supported the government’s accountability principles, in its responding submission it has expressed concern that the legislation, on top of other major regulatory changes and existing laws will impede business.
Chief executive Sally Loane noted the measure as proposed would be implemented in addition to the five current pieces of legislation governing advice and the raft of royal commission legislation, including enforceable codes and very significant potential for criminal and civil penalties.
The association’s submission listed a number of concerns including complexity, with the FSC stating the interaction of FAR with general law and statutory rules and the extent to which it applied to foreign entities and executives have also not been clarified.
“We urge the government to investigate fully the potential consequences of this new regime and how it will align with existing and longstanding laws such as directors and officers duties under the Corporations Act and the Superannuation Industry (Supervision) Act which [govern] most superannuation trustees,” Ms Loane said.
“We want to be certain that all these pieces of legislation and regulation align and work together to provide better consumer outcomes, and do not operate as a disincentive for business.”
Further, the FSC suggested the regime may be in danger of overreach, with many more individuals being characterised as accountable than under BEAR.
“The cost and benefit of such an extensive reach [are] questionable,” the council commented.
FAR could also have unintended consequences, with the FSC warning that the “individual civil penalty regime, which includes penalties in the order of a million dollars, may operate as a disincentive to recruitment and adversely impact on talent retention strategies in the financial services sector”.
The FSC added it understands that the exercise of the individual civil penalty regime and the non-objections power fall in a “last resort” category and could be addressed in an explanatory memorandum, a measure the council call “unsatisfactory” and should be expressed in the legislation itself.
