FSC warns of increased expense under Financial Accountability Regime
The Government will need to deliver clarity between how its new Financial Accountability Regime (FAR) will work alongside the Design and Distribution Obligations (DDO) which are still under development, according to the Financial Services Council (FSC).
The submission, filed with the Treasury this week, raises serious questions about the new regime, including about whether it will cover foreign entities and executives.
The FAR regime represents an extension of the Bank Executive Accountability Regime to a broader range of financial services businesses and, like other organisations, the FSC has also expressed concern at the degree to which it will act as an impediment to recruitment.
“Given that the Regulators have power to disqualify a person from acting as an accountable person, (subject to review and appeal rights), we do question the need for such a regime. In a practical sense it seems to us that a disqualified person is extremely unlikely to ever again secure a comparable position in the financial services industry,” the submission said.
“We also express our concern as to the impact such a regime might have on appropriate recruitment and retention,” it said and cited the experience in the United Kingdom where firms had found it more expensive to recruit for senior roles.
“We anticipate there would be a similar impact to the Australian industry following the introduction of the FAR regime,” the submission said. “The industry may see increased remuneration costs to compensate for the risk of multiple levels of the organisation or alternatively a reduced talent pool.”
Commenting on the Government’s proposals, FSC chief executive, Sally Loane, said the measures as proposed would be 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.
“We urge the Government to investigate fully the potential consequences of this new regime and how it will align with existing and long-standing laws such as directors and officers’ duties under the Corporations Act and the Superannuation Industry (Supervision) Act which governs most superannuation trustees.
“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,” Loane said.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
