Financial Accountability Regime: HSF makes submission on Regulator Rules

In July 2023, ASIC and APRA released key materials for consultation, to support the implementation of the Financial Accountability Regime (FAR) by the financial services industry. This included the proposed Regulator Rules and the 'Key Functions' descriptions for ADIs (Consultation Documents).

Our team has made a formal submission on this consultation.

While we welcome the proposal to provide greater clarity on the operation of FAR, there are some aspects of the Consultation Documents on which we wish to comment. We are concerned that several aspects of the Consultation Documents will lead to unintended consequences with respect to the operation of the FAR. In particular, our submission is focussed on the Key Functions.

If you would like to read a copy of our full submission, download a copy here.

In summary, HSF makes the following submissions:

1. The concept of Key Functions should be removed from the proposed Regulator Rules as there is a real risk that its inclusion creates the unintended effect of expanding the list of accountable persons and/or the scope of their responsibilities and is not aligned with the policy intent previously communicated by Treasury, including as reflected in the Explanatory Statement to the exposure draft of the Financial Accountability Regime Minister Rules 2022 (Minister Rules).
2. While our recommendation is that the Key Functions information be removed from the registration requirements in Rule 5 of the proposed Regulator Rules, if they are retained, the Key Functions should be amended to make it explicit that they are only intended to cover senior executive responsibility and not the execution, maintenance or primary conduct of the relevant functions.
3. The Key Functions information should not be included in the register established under section 40 of the Financial Accountability Regime Bill 2023 (Cth) (FAR Bill) as information of this kind is already captured by the core and enhanced notification obligations of accountable entities. Further guidance about what triggers a material change notification in relation to the Key Functions information will be necessary if this information is retained in the register.
4. The Regulators should adopt the approach to key functions taken in implementing the BEAR, at least in respect of ADIs who are subject to the BEAR, including to mitigate against unnecessary regulatory burden.
5. The Regulators should issue a joint regulatory guidance note which includes guidance on responsibilities to be allocated in practice to accountable persons and remove the requirement to allocate Key Functions and register accountable persons for each Key Function.
6. The Regulators should re-visit the purpose of the Key Functions information and consider whether the information is appropriate in circumstances where accountable entities with enhanced notification obligations are already required to provide comprehensive information of the type sought by the Key Functions list (under the requirements for those entities to prepare and lodge accountability statements and accountability maps). In view of this, one approach open to the Regulators is to retain the prescription of the Key Functions information under Rule 5 of the Regulator Rules, but only for accountable entities that are not subject to enhanced notification requirements and therefore not required to prepare accountability statements and accountability maps.
7. The Regulators should clarify how the Regulator Rules, and if retained, the Key Functions document, are intended to be used and relied upon by the Regulators.

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