FAR transition | Regulators issue final Rules

6 minute read  08.03.2024 Kate Hilder, Siobhan Doherty, Richard Batten, Paul Schoff, Ruth Stringer, Ian Lockhart, Martin Wright, Gordon Williams, Jennifer Dornan, Guy Spielman

ASIC and APRA have finalised new Rules setting out what information they need from ADIs about their Accountable Persons (APs) at the 'transition point' from the BEAR to the FAR - Financial Accountability Regime (Consequential Amendments) Transitional Rules 2024 (Transitional Rules) - and confirming the information to be included in the FAR register of accountable persons -Financial Accountability Regime Act (Information for register) Regulator Rules 2024 (Regulator rules).  Here's what you need to know.

Key takeouts

For context, the Financial Accountability Regime Bill 2023 and the Financial Accountability Regime (Consequential Amendments) Bill 2023 passed both Houses on 5 September 2023 and received Assent on 14 September 2023. The FAR which replaces and expands on the existing BEAR will apply to the banking sector from March 2024 and the insurance and superannuation sectors from March 2025. For more on the FAR read: FAR status update: FAR Bills now law.

Following consultation, the Financial Accountability Regime (Minister) Rules 2024 (Rules) have been released in final form. Importantly, these Rules both: a) prescribe the responsibilities and positions 'which cause an individual to be an accountable person of an accountable entitiy' and b) prescribe when an accountable entity meets the 'enhanced notification threshold'. For more read: FAR implementation | Financial Accountability Regime (Minister Rules) 2024 published - POST - MinterEllison

ASIC and APRA (which will jointly administer the FAR) have now released:

ASIC and APRA expect to jointly consult on the Regulator rules for the FAR for the insurance and superannuation industries by the end of March 2024.

ADIs Transitioning from BEAR to FAR

What information do ADIs need to provide to ASIC and APRA about their FAR Accountable Persons?

The Financial Accountability Regime (Consequential Amendments) Transitional Rules 2024 prescribe the information that ADIs that are currently subject to the BEAR and which will become accountable entities under the FAR, need to provide to ASIC and APRA (the Regulators) about their FAR accountable persons (AP), as well as when and in what form the information needs to be provided.

Broadly, for each existing AP under the BEAR who will become an AP under the FAR and for APs that are not currently APs under the BEAR but will be APs under the FAR, ADIs will need to provide the following information: 

  • Personal identification details: Director identification number (if applicable) as well as direct phone number and email 
  • Employment details: start date of the position title, start date of employment with the employer
  • Reporting lines: position title of the person the AP reports to and the date the AP started to report to that person
  • Responsibilities information: details of each 'General or Prescribed Responsibility or Position that causes the person to be an accountable person'. Prescribed Responsibility means any one or more responsibilities set out in the relevant sections - ss 10(1)(b)(i); 10(1)(b)(ii) 10(2)(b), 10(3), 10(5)(a), 10(5)(b), 10(6)(b)(i) of the Act; or 10(6)(b)(ii) - of the Financial Accountability Regime Act 2023.
  • 'ADI Key functions information': ADIs will need to report what 'ADI Key Function/Functions' each AP has 'effective senior executive responsibility' for and when they assumed responsibility for each. These ADI Key Functions are: 

'(a) capital management;
(b) collections and enforcement (default, debt collections, and recovery);
(c) conduct risk management;
(d) credit risk management;
(e) data management;
(f) financial and regulatory reporting;
(g) hardship processes;
(h) liquidity and funding management;
(i) market risk management;
(j) operational risk management;
(k) product design and distribution obligations;
(l) product origination;
(m) recovery and exit planning and resolution planning;
(n) scam management;
(o) technology management;
(p) training and monitoring of relevant representatives and staff; and
(q) whistleblower policy and process'.

On this, the explanatory statement makes clear that:

'The instrument does not require a relevant accountable entity to undertake each ADI Key Function or to assign each ADI Key Function to an accountable person.

The concept of ADI Key Functions does not expand the definition or scope of responsibilities of accountable persons under the FAR Act…Relevant information in respect of ADI Key Functions should reflect actual practices. For example, one accountable person may not have the requisite level of responsibility for any applicable ADI Key Functions, while another accountable person may have the requisite level of responsibility for multiple applicable ADI Key Functions. Accountable entities can also assign an applicable ADI Key Function to more than one accountable person if those accountable persons have the requisite level of responsibility for different aspects of the ADI Key Function'.

Information to be included in the FAR Register of Accountable Persons 

The Regulators are required to establish and keep a register of Accountable Persons under the FAR. The Financial Accountability Regime Act (Information for register) Regulator Rules 2024 (Regulator Rules) prescribes the information for inclusion in this register.

Broadly, the Register will include all of the information about APs outlined in the Transition Rules including 'ADI Key Functions' information. The explanatory statement comments that:

'The inclusion of information regarding ADI Key Functions in the register of accountable persons will assist the Regulators in assessing a relevant accountable entity’s compliance with its obligation under paragraph 23(1)(a) [key personnel obligations] of the Act'.

The register will also include some additional information, for example changes to the information including details of: 

'suspension (where the suspension is because the person has failed to comply with one or more of the person’s accountability obligations under section 21 of the Act) start date and end date'.

Instruction guides for FAR reporting

The regulations state that ADIs will need to complete and submit the relevant electronic notification forms (in APRA Connect) for transitioning APs by 14 April 2024 (30 days after FAR commences for ADIs).

However, ASIC/APRA have issued 'no action' letter confirming that they 'expect entities to submit their registration applications and to make relevant notifications to us as promptly as possible, and by no later than 30 June 2024'.

APRA has made instruction guides for APRA Connect FAR reporting available here: APRA Connect FAR reporting forms – instruction guides | APRA

[Sources: Financial Accountability Regime Act (Information for register) Regulator Rules 2024; Financial Accountability Regime Act (Information for register) Regulator Rules 2024; ASIC/APRA joint media release 08/03/2024; ADI Key Functions Descriptions]

Interested in this (and similar) topics?

Subscribe to alerts and our weekly wrap up of key financial services, risk, regulatory and ESG developments.

Contact

Tags

eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuYW1laWQiOiI2OTUxN2VjMS0xOGUyLTQ0NDEtOGU0Mi0wYmEyOTUwNzRjNjQiLCJyb2xlIjoiQXBpVXNlciIsIm5iZiI6MTcxODYzNDU2OSwiZXhwIjoxNzE4NjM1NzY5LCJpYXQiOjE3MTg2MzQ1NjksImlzcyI6Imh0dHBzOi8vd3d3Lm1pbnRlcmVsbGlzb24uY29tL2FydGljbGVzL3JlZ3VsYXRvcnMtaXNzdWUtZmluYWwtZmFyLXJlZ3VsYXRvci1ydWxlcy1mYXItdHJhbnNpdGlvbi1ydWxlcyIsImF1ZCI6Imh0dHBzOi8vd3d3Lm1pbnRlcmVsbGlzb24uY29tL2FydGljbGVzL3JlZ3VsYXRvcnMtaXNzdWUtZmluYWwtZmFyLXJlZ3VsYXRvci1ydWxlcy1mYXItdHJhbnNpdGlvbi1ydWxlcyJ9.hRgM0vkx5wdg7iKSQVuzNrCeT0qra0S5dQ8vjtFhebc
https://www.minterellison.com/articles/regulators-issue-final-far-regulator-rules-far-transition-rules