Home Insights Federal Government introduces proposed Financial Accountability Regime to Parliament

Federal Government introduces proposed Financial Accountability Regime to Parliament

On 28 October, Federal Government introduced the Financial Accountability Regime Bill 2001 (Cth) (FAR Bill) to Parliament. If enacted, the FAR Bill will put in place a regime intended to enhance the reach of executive accountability laws in the financial services sector. 

There are a number of key changes between the FAR Bill and its Exposure Draft released earlier this year in our Insight.

Key issues

New civil penalty liability regime for accountable persons

The FAR Bill provides for civil penalty liability to arise to individuals in certain circumstances. Accountable persons may be subject to civil penalties for ancillary liability including where they are in any way, directly or indirectly, knowingly concerned in, or party to, a contravention of a civil penalty provision of the FAR Bill.

The maximum penalty for such a contravention is the maximum of $1.1 million, or three times the benefit gained or detriment avoided because of the contravention.

The ancillary civil penalty liability regime for individuals represents a considerable shift away from the position adopted in the Exposure Draft. It is a return towards the model contemplated by the January 2020 Financial Accountability Regime Proposal Paper and adopted in international jurisdictions such as the United Kingdom. However, it is notable that civil penalties under the Exposure Draft were limited in their application to accountable entities, rather than individuals.

Accountability obligation softened

The Exposure Draft included an accountability obligation for accountable persons to take reasonable steps in conducting their responsibilities to ensure that the accountable entity complies with a range of financial service laws (including regulations and other instruments made under those laws).

This obligation has been slightly reduced in scope in the FAR Bill, by instead applying an obligation take reasonable steps to prevent matters from arising that would (or would be likely to) result in a material contravention of the these financial services laws. While the removal of the reference to ‘ensure’ is welcome, the scope of this obligation remains very broad, despite the ‘reasonable steps’ qualifier.

ASIC’s functions and powers clarified

To an extent, the FAR Bill has helpfully clarified the functions and powers of ASIC in administering the FAR Bill. It includes a list of provisions under which ASIC has functions and powers.

Notable functions ASIC will perform under the proposed FAR include: disqualifying accountable persons, conducting investigations and examinations and commencing civil penalty proceedings. It remains to be seen how the performance of these functions will be shared with APRA in practice. We expect that the Regulators will provide details of their administration arrangements and relevant guidance shortly.

An uncertain notification threshold

The FAR Bill implements a tiered system of notification requirements for events which must be notified to the Regulator. Under this system, certain accountable entities are subject to ‘enhanced notification obligations’, and will be subject to significantly more onerous requirements. The enhanced notification threshold is set by the Minister, who may prescribe, by legislative instrument, rules setting out how to determine the enhanced notification threshold.

The FAR Bill allows the Minister’s rules to adopt any material published on the website of ASIC or APRA. It is unclear about whether ASIC or APRA may at any time vary the threshold for enhanced notification obligations. It is also unclear why this mechanism has been proposed instead of ensuring that the threshold is subject to the usual disallowance process for legislative instruments.

Register of accountable persons to be made available

Under the FAR Bill, the Regulator must establish and keep a register of accountable persons. This register must include details of any accountable person’s disqualification under the FAR Bill. Notably, ASIC or APRA are permitted to make any of the information contained in this register available online.

What’s next

Once passed by Parliament, FAR will have effect as follows:

  • for the banking industry, it will apply from 1 July 2022 (or six months after Royal Assent, whichever is later); and

  • for the insurance and superannuation industries, it will apply from 1 July 2023 (or 18 months after Royal Assent, whichever is later).


Henry Hall

Senior Associate


Board Advisory Banking and Financial Services Litigation and Dispute Resolution

This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.

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