The AICD is supportive of the overall objectives of the FAR and we acknowledge the need for increased accountability and compliance within the financial sector. We also support Commissioner Hayne’s recommendation to extend the BEAR to all APRA-regulated entities.

However, our submission raised the following concerns:

  • the Exposure Draft seeks to not only extend but to expand the BEAR. We believe, in accordance with the recommendations of the Financial Services Royal Commission, the legislation should limit itself to extending the BEAR;

  • sub-section s.76(2) of the Exposure Draft exposes individuals to accessorial liability under the FAR in contradiction to the stated policy intention of the legislation. It should be amended so that only accountable entities may be held liable for breaches of their obligations;

  • the use of the word “ensure” in Part 2 of Chapter 2 of the Exposure Draft sets an extraordinarily high bar, requiring an accountable person (or indeed an entity) to guarantee compliance with all obligations including all obligations under Acts, regulations, determinations and orders. This wording is inappropriate and does not reflect the role of non-executive directors in governance and oversight, as opposed to management, of financial services entities;

  • sub-section 20(d) should be deleted from the Exposure Draft;

  • where the word “ensure” appears in Part 2 of Chapter 2 of the Exposure Draft it should be deleted and replaced with “support”;

  • sub-section 19(1)(d) exposes directors to unreasonable personal liability risk, is too broad in scope and complexity, is not aligned with the recommendations of the Financial Services Royal Commission and duplicates existing provisions. It should be deleted from the Exposure Draft;

  • the new responsibilities relating to directors as accountable persons substantially and unfairly increase their risk of exposure to prosecution for breaches of directors’ duties under the Corporations Act 2001 (Cth);

  • the requirement to deal with the Regulator in an ‘open, constructive and cooperative way’, raises some concerns when extended to ASIC given its prosecutorial role, particularly in relation to directors’ duties;

  • we do not consider the broad proposed directions powers in the Exposure Draft are necessary;

  • there should be greater alignment of the deferred remuneration obligations in the Exposure Draft with APRA’s draft CPS 511. Where there is inconsistency on matters such as deferral amounts and periods, draft CPS 511 should be amended to align with the provisions in the Exposure Draft;

  • the privilege against self-incrimination regarding civil penalties from the BEAR should be restored;

  • the Exposure Draft should at least, in part, detail how the Parliament expects the Regulators to jointly administer the FAR. The proposed public arrangement concerning joint administration, while welcome, should contain sufficient detail, supported by regulator guidance, to allow accountable entities and accountable persons to sufficiently understand how the Regulators will administer the FAR; and

  • the Exposure Draft should address the vague wording around joint liability and clarify responsibilities to ensure individual accountability.

The AICD looks forward to further engaging with the Government and the Parliament about the proposed FAR.

You can read a copy of the AICD’s submission here.