The government recently released a proposal paper seeking feedback on plans to extend the existing Banking Executive Accountability Regime (BEAR) to all Australian Prudential Regulation Authority (APRA) regulated entities and to directors/senior executives in accordance with the government's response to several Hayne Commission recommendations. The expanded regime will be called the Financial Accountability Regime (FAR).
Consultation on the proposed changes closed on the 14 February and the government has flagged its intention to introduce legislation to by the end of the year. However, no precise implementation date has been confirmed.
Extending the BEAR to the superannuation sector: expert insights
MinterEllison's Mark Standen recently presented a paper at the Law Council Conference, on the implications of extending the proposed FAR regime to the superannuation sector.
[Note: The full text of the paper can be downloaded in full at the end of this post.]
The paper includes:
- a detailed overview of the BEAR and the proposed FAR regimes
- key differences between the two regimes
- expert insights into the practical issues trustees are likely to face in implementing the proposed FAR (informed by the experiences of ADIs over the past two years).
Seven steps for implementing the proposed FAR
Mr Standen suggests that a practical approach to a FAR implementation project for an RSE licensee is likely to include the following seven steps:
- determine an executive sponsor for the project and establish a supporting steering group (ie, CEO, Business Executive, CRO, Head of Legal, or HR);
- gather a picture of current state (organisational structure charts, role descriptions, employment arrangements, etc) so that a 'gap analysis' to FAR target state can be determined;
- schedule board and executive team briefings to raise awareness and answer questions the board and executive may have on the implications of FAR on their roles;
- conduct sessions where key executives can workshop how they might respond to some of the scenarios criticised in the Financial Services Royal Commission (FSRC), or which may be identified as being issues of concern within the organisation, if they were the relevant accountable persons;
- gather a multidisciplinary team to support the project, including specialised experience in legal, executive remuneration and governance;
- start the process early as industry has found the process more complicated than originally anticipated and have needed time to understand and resolve the complexities; and
- see the opportunities for the organisation and the industry and communicate those benefits early on to key stakeholders.
Commenting on the proposed changes, Mr Standen emphasised the value of early preparation.
'Given the complexity of the changes, it would be prudent for entities to start thinking, if they haven't already, about some of the steps I've outlined in the paper. We don't know exactly when the changes will be introduced, and we don't know that the detail will remain exactly the same as what has been proposed, but we know that change is inevitable and therefore, as Deputy Chair Helen Rowell recently said, it makes sense to start to prepare.