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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Financial
Accountability Regime Bill 2023
Financial Accountability Regime (Consequential Amendments) Bill
2023
EXPLANATORY MEMORANDUM
Glossary............................................................................................................ iii
General outline and financial impact............................................................. 1
Chapter 1: Financial Accountability Regime...................................... 3
Chapter 2: Statement of Compatibility with Human Rights........... 63
This Explanatory Memorandum uses the following abbreviations and acronyms.
|
Definition |
|
|
ADI |
Authorised Deposit-taking Institution |
|
APRA |
Australian Prudential Regulation Authority |
|
ASIC |
Australian Securities and Investments Commission |
|
Banking Executive Accountability Regime |
The Banking Executive Accountability Regime in Part IIAA of the Banking Act 1959 |
|
Corporations Act |
Corporations Act 2001 |
|
Credit Act |
National Consumer Credit Protection Act 2009 |
|
Financial Accountability Regime
|
The Financial Accountability Regime introduced in the Financial Accountability Regime Bill 2023 |
|
Financial Services Royal Commission |
Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry |
|
Financial Services Royal Commission Final Report |
The Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry |
|
the Guide to Framing Commonwealth Offences |
The Attorney-General’s Department’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011 edition |
|
ICCPR |
International Covenant on Civil and Political Rights |
|
the Regulator |
Under the Financial Accountability Regime, generally, the Regulator is both APRA and ASIC. However, if an accountable entity does not hold an Australian financial services licence or an Australian credit licence, then the Regulator for that accountable entity and its significant related entities and accountable persons is only APRA. |
Financial Accountability Regime
Outline
The Financial Accountability Regime Bill 2023 introduces a new accountability regime for the banking, insurance and superannuation industries.
The Financial Accountability Regime (Consequential Amendments) Bill 2023 makes consequential amendments to relevant Acts to support the Financial Accountability Regime.
Date of effect
The Financial Accountability Regime Bill 2023 commences the day after Royal Assent. The regime will apply to the banking industry six months after commencement of the Financial Accountability Regime Bill 2023 and to any new entrants beyond that, from the time they become an ADI or a non-operating holding company. The regime will apply to the insurance and superannuation industries 18 months after commencement of the Financial Accountability Regime Bill 2023, and to any new entrants beyond that, from the time they become licensed.
Schedule 1 Part 1 and Schedule 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 commence the day after Royal Assent, at the same time as the Financial Accountability Regime Bill 2023 commences. Schedule 1 Part 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 will commence the date the regime applies to the banking industry. That date will be six months after commencement of the Financial Accountability Regime Bill 2023.
Proposal announced
This proposal was announced on 4 February 2019 as part of the former Government’s response to the Financial Services Royal Commission.
Financial impact
Nil.
Impact Analysis
The Financial Services Royal Commission Final Report has been certified as being informed by a process and analysis equivalent to an Impact Analysis for the purposes of the Government decision to implement this reform. The Financial Services Royal Commission Final Report can be accessed through the Australian Parliament House website. [1]
Human rights implications
The Financial Accountability Regime Bill 2023 does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 2 of this Explanatory Memorandum.
Financial Accountability Regime (Consequential Amendments) Bill 2023 does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 2 of this Explanatory Memorandum.
Outline of chapter
Context of amendments
Summary of new law
Detailed explanation of new law
Entities regulated under the Financial Accountability Regime
Obligations of accountable persons under the Financial Accountability Regime
Obligations of accountable entities under the Financial Accountability Regime
Administration of the Financial Accountability Regime
Ensuring compliance of the obligations imposed under the Financial Accountability Regime
Enforcement and penalties
Miscellaneous provisions
Commencement, application, and transitional provisions
Transitional arrangements for the banking industry
Transitional arrangements for insurance and superannuation industries
Outline of chapter
1.1 This chapter provides an overview of the Financial Accountability Regime.
Context of amendments
1.2 The Australian financial system is central to the economy and plays an essential role in promoting economic growth. Decisions taken by directors and senior executives of financial institutions are important and have flow on effects for the Australian economy and for consumers.
1.3 A key objective of the Financial Accountability Regime is to improve the operating culture of entities in the banking, insurance and superannuation industries and to increase transparency and accountability across these industries—both in relation to prudential matters and conduct related matters.
1.4 The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Act 2018 enacted the Banking Executive Accountability Regime, which commenced on 1 July 2018. The Banking Executive Accountability Regime is an accountability framework for directors and senior executives of ADIs (entities that carry on banking business) and their subsidiaries.
1.5 The Financial Services Royal Commission made a number of recommendations relating to extending the Banking Executive Accountability Regime to other APRA regulated industries and to have APRA and ASIC jointly administer the extended regime.
1.6 These recommendations include:
· recommendation 3.9—to extend provisions modelled on the Banking Executive Accountability Regime to registrable superannuation entity licensees;
· recommendation 4.12—to extend provisions modelled on the Banking Executive Accountability Regime to insurers regulated by APRA;
· recommendation 6.6—to have APRA and ASIC jointly administer the Banking Executive Accountability Regime;
· recommendation 6.7—to make it clear that ADIs and their accountable persons must deal with both APRA and ASIC in an open, constructive and cooperative way; and
· recommendation 6.8—to have APRA and ASIC jointly administer the extended regime.
1.7 The Financial Accountability Regime is the Government’s implementation of those Financial Services Royal Commission recommendations. The regime is designed to improve the risk and governance cultures of Australia’s financial institutions by imposing a strengthened responsibility and accountability framework for those institutions and the directors and the most senior and influential executives (accountable persons) of those institutions.
Summary of new law
1.8 The Financial Accountability Regime imposes four core sets of obligations:
· accountability obligations—which require entities in the banking, insurance and superannuation industries and their directors and most senior and influential executives to conduct their business in a certain manner (i.e. honesty and with care, skill and diligence);
· key personnel obligations—which require entities in the banking, insurance and superannuation industries to nominate senior and influential executives to be responsible for all areas of their business operations;
· deferred remuneration obligations—which require entities in the banking, insurance and superannuation industries to defer at least 40 per cent of the variable remuneration (for example, bonuses and incentive payments) of their directors and most senior and influential executives for a minimum of 4 years, and to reduce their variable remuneration for non-compliance with their accountability obligations; and
· notification obligations—which require:
- entities in the banking, insurance and superannuation industries to meet the core notification obligations by providing the Regulator with certain information about their business and their directors and most senior and influential executives; and
- for entities above a certain threshold, which will be determined by rules made by the Minister, to meet the enhanced notification obligations, by preparing and submitting accountability statements and accountability maps.
1.9 The Financial Accountability Regime will apply to the banking industry six months after the commencement of the Financial Accountability Regime Bill 2023, and to any new entrants beyond that, from the time they become an ADI or authorised non-operating holding company. The Banking Executive Accountability Regime will be repealed when the obligations under the Financial Accountability Regime begin to apply to the banking industry.
1.10 The Financial Accountability Regime will apply to the insurance and superannuation industries from 18 months after commencement of the Financial Accountability Regime Bill 2023 and to any new entrants beyond that, from the time they become licensed.
1.11 The entities to which the Financial Accountability Regime applies are referred to as accountable entities . These entities are:
· ADIs;
· authorised non-operating holding companies of ADIs;
· general insurers;
· authorised non-operating holding companies of general insurers;
· life companies;
· registered non-operating holding companies of life companies;
· private health insurers; and
· registrable superannuation entity licensees (or RSE licensees).
1.12 The Financial Accountability Regime also provides for the regulation of the directors and most senior and influential executives of accountable entities who:
· have actual or effective senior executive responsibility for management or control of the accountable entity or its relevant group; or
· hold particular responsibilities and/or positions prescribed in the rules made by the Minister.
1.13 The directors and senior executives who are regulated under the Financial Accountability Regime are referred to as accountable persons .
1.14 The Financial Accountability Regime imposes accountability obligations on accountable persons, requires accountable persons be registered, and gives the Regulator power to disqualify someone from being an accountable person of an entity or a class of entities regulated by the regime. The Regulator may also direct an accountable entity to reallocate the responsibilities of its accountable persons to address prudential risks or risks of significant and systemic non-compliance.
1.15 The Financial Accountability Regime will be jointly administered by APRA and ASIC. The Financial Accountability Regime Bill 2023 sets out the powers the Regulators can exercise under the regime and their shared responsibilities. However, ASIC’s powers under the regime only provides for ASIC to be able to regulate entities licensed under financial services law or credit legislation. The Financial Accountability Regime Bill 2023 refers to APRA and ASIC collectively (or just to APRA, where it is the sole regulator) as the Regulator .
Detailed explanation of new law
1.16 The object of the Financial Accountability Regime is to impose a strengthened accountability framework for certain entities in the banking, insurance and superannuation industries, and their directors and most senior and influential executives.
[Section 3 of the Financial Accountability Regime Bill 2023]
1.17 The Financial Accountability Regime Bill 2023 will achieve this by placing accountability obligations on certain entities within these industries, referred to as accountable entities . Some corporate groups may have multiple accountable entities.
[Section 9 of the Financial Accountability Regime Bill 2023]
1.18 Some of the legal obligations in the Financial Accountability Regime will require an accountable entity to take reasonable steps to ensure that its significant related entities (for most entities, its significant subsidiaries) act in accordance with the regime. However, those significant related entities will not generally be subject to direct legal obligations under the regime.
[Section 12 and paragraph 20(e) of the Financial Accountability Regime Bill 2023]
1.19 The Financial Accountability Regime also places legal obligations on the directors and most senior and influential executives of accountable entities, referred to as accountable persons .
[Section 10 of the Financial Accountability Regime Bill 2023]
1.20 The Financial Accountability Regime Bill 2023 provides a number of definitions to establish the new legislative framework and ensure that the regime interacts effectively with existing legislation.
[Section 8 of the Financial Accountability Regime Bill 2023]
Entities regulated under the Financial Accountability Regime
Accountable entities under the Financial Accountability Regime
1.21 The Financial Accountability Regime imposes obligations on accountable entities in the banking, insurance and superannuation industries.
1.22 An accountable entity is generally an entity which holds a licence to carry on a banking, insurance or superannuation business. Accountable entities are the primary entities which are regulated under the Financial Accountability Regime.
1.23 In the banking sector, the following bodies corporate are accountable entities:
· an ADI under the Banking Act 1959 ;
· an authorised non-operating holding company under the Banking Act 1959 .
[Subsection 9(1) of the Financial Accountability Regime Bill 2023]
1.24 For the insurance and superannuation industries the following bodies corporate will be accountable entities under the Financial Accountability Regime:
· for general insurance:
- a general insurer under the Insurance Act 1973 ;
- an authorised non-operating holding company of a general insurer under the Insurance Act 1973 ;
· for life insurance:
- a life company registered under the Life Insurance Act 1995 ;
- a registered non-operating holding company of a life company under the Life Insurance Act 1995 ;
· for private health insurance—a private health insurer under the Private Health Insurance (Prudential Supervision) Act 2015 ; and
·
for superannuation—a licensed trustee of a superannuation
entity (a registrable superannuation entity licensee (a RSE
licensee) under the Superannuation Industry (Supervision) Act
1993 ).
[Subsections 9(3) and (4) of the Financial
Accountability Regime Bill 2023]
1.25 To be an accountable entity, a body corporate must also be a constitutionally covered body. A body will be a constitutionally covered body, if:
· it is a constitutional corporation;
· it carries on a business of banking, insurance or superannuation; or
·
its conduct affects, or could affect, a constitutional corporation
or a body that carries on a business of banking, insurance or
superannuation.
[Paragraphs 9(1)(b) and 9(3)(b) and
section 13 of the Financial Accountability Regime Bill
2023]
1.26 The Financial Accountability Regime will have a staggered application to the banking, insurance and superannuation industries.
1.27
The banking industry will transition from the Banking Executive
Accountability Regime to the Financial Accountability Regime six
months after commencement of the Financial Accountability Regime
Bill 2023.
[Subsection 9(2) of the Financial
Accountability Regime Bill 2023]
1.28
The deferred remuneration obligations under the Financial
Accountability Regime will apply when the decision to provide
remuneration occurs in first financial year that begins six months
after the Financial Accountability Regime begins to apply to the
banking industry.
[Schedule 2, item 11 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.29
Once the Financial Accountability Regime starts applying to the
banking industry, the regime will apply to new entrants from the
time they become an ADI or a non-operating holding company under
the Banking Act 1959 .
[Paragraph 9(2)(b) of the Financial
Accountability Regime Bill 2023]
1.30
The Financial Accountability Regime will apply to the insurance and
superannuation industries 18 months after commencement of the
Financial Accountability Regime Bill 2023.
[Subsections 9(3) and (4) of the Financial
Accountability Regime Bill 2023]
1.31
Once the Financial Accountability Regime starts applying to the
insurance and superannuation industries, the regime will apply to
new entrants from the time they become licensed.
[Paragraph 9(4)(b) of the Financial
Accountability Regime Bill 2023]
Obligation on accountable entities in relation to their significant related entities
1.32 The Financial Accountability Regime imposes some obligations on an accountable entity in relation to its significant related entities.
1.33 An accountable entity’s significant related entities can include entities that are incorporated and operate outside of Australia, as well as entities within Australia. This approach recognises that financial services are often provided by large international corporate businesses and the activities of foreign entities can have a significant effect on the provision of services in Australia.
Significant related entities of accountable entities in the banking and insurance industries
1.34 For the banking and insurance industries, an entity will be a significant related entity of an accountable entity if it is:
· a subsidiary of the accountable entity; and
·
the effect of the subsidiary on the accountable entity is material
and substantial.
[Subsection 12(1) of the Financial
Accountability Regime Bill 2023]
1.35
The Financial Accountability Regime Bill 2023 contains a list of
factors to assist consideration of whether the relationship between
an accountable entity and another entity is sufficiently material
and substantial to make the other entity a significant related
entity. Such factors include the nature and scale of the
entity’s business or activities, any interdependency between
the entity and the accountable entity, any organisational,
financial or administrative arrangements between the entity and the
accountable entity, as well as any other relevant factor.
[Subsection 12(4) of the Financial
Accountability Regime Bill 2023]
1.36 The relationship between an accountable entity and another entity will be sufficiently material and substantial if the other entity’s business activity has the potential to have a significant impact on the accountable entity or its relevant group’s business operations or its ability to manage risks effectively.
1.37 The Financial Accountability Regime recognises that related entities’ operations may be significant to the accountable entity’s business. For example, consumers often associate a wide range of financial services and activities provided by a corporate group under the accountable entity’s brand. Poor behaviour by a significant related entity can have a negative effect on the accountable entity’s brand and public standing and has the potential to adversely affect the prudential reputation of the accountable entity itself.
1.38
In general, a given significant related entity can only be related
to one accountable entity, its closest parent accountable entity.
This rule provides clarity around the operation of the regime and
ensures that each significant related entity is the sole
responsibility of one accountable entity.
[Subsection 12(2) of the Financial
Accountability Regime Bill 2023]
1.39
A significant related entity must be a constitutionally covered
body.
[Paragraph 12(1)(c) and section 13 of the
Financial Accountability Regime Bill 2023]
Diagram 1.1 —Accountable entities and their significant related entities
The below corporate group contains four accountable entities from the banking, insurance and superannuation industries. Each accountable entity has obligations in relation to the conduct of its significant related entities. However, there are other entities in the group that are not regulated under the Financial Accountability Regime.
Significant
related entities in the superannuation industry
1.40 A significant related entity of an accountable entity that is a registrable superannuation entity licensee can be a wider variety of entities than a significant related entity in the banking and insurance industries.
1.41 Significant related entities of registrable superannuation entity licensees can be:
· subsidiaries of the licensee;
· other related bodies corporate of the licensee (such as parent and sibling entities); and
·
entities with certain control relationships with the
licensee.
[The definition of ‘connected
entity’ in section 8 and subsection 12(3) of the Financial
Accountability Regime Bill 2023; see also section 10 of the
Superannuation Industry (Supervision) Act 1993 and section 50AAA of
the Corporations Act]
1.42 Different related entities are covered by the Financial Accountability Regime for registrable superannuation entity licensees as they may have a different operating structure to other types of accountable entities. In particular, a connected entity of a registrable superannuation entity licensee could have a material and substantial impact on the licensee but may not be a subsidiary of the licensee. These connected entities can be significant related entities of registrable superannuation entity licensees.
1.43 Additionally, unlike other accountable entities, a related entity can be a significant related entity of more than one registrable superannuation entity licensee.
1.44 The four cumulative requirements to determine whether a body corporate is a significant related entity of an accountable entity that is a registrable superannuation entity licensee are that the body corporate:
· is a connected entity of the accountable entity, as defined by section 8;
· has a material and substantial effect on the accountable entity or the business or activities of the accountable entity (or the body corporate’s business or activities have such an effect);
· is a constitutionally covered body within the meaning of section 13; and
·
is not an accountable entity itself.
[Subsection 12(3) of the Financial
Accountability Regime Bill 2023]
1.45
Factors to assist consideration of whether the relationship between
an accountable entity and another entity is sufficiently material
and substantial to make the other entity a significant related
entity are set out in subsection 12(4). Such factors include the
nature and scale of the entity’s business or activities, any
interdependency between the entity and the accountable entity, any
organisational, financial or administrative arrangements between
the entity and the accountable entity, as well as any other
relevant factor.
[Subsection 12(4) of the Financial
Accountability Regime Bill 2023]
Diagram 1.2 — Significant related entities of registrable superannuation entity licensees
The below corporate group contains three accountable entities: two registrable superannuation entity licensees and a general insurer. Subsidiary C is a significant related entity to both superannuation entities and the insurer. The other associated entity is a significant related entity to both superannuation entities, as are subsidiaries A and B. More than one accountable entity will be responsible for each of the significant related entities .
Diagram 1.3 — Significant related entities of a not-for-profit registrable superannuation entity licensee
The
below corporate group contains one accountable entity (the
registrable superannuation entity licensee) and five connected
entities of the registrable superannuation entity licensee.
Entities A, B and E are significant related entities of the
registrable superannuation entity licensee. 
Accountable persons under the Financial Accountability Regime
1.46 The conduct of a business is ultimately determined by its directors and its most senior and influential executives. These directors and executives of accountable entities are regulated by the Financial Accountability Regime as accountable persons.
1.47
The Financial Accountability Regime places a series of obligations
on accountable persons such as requirements to act with honesty and
integrity, and with due skill, care and diligence, and to deal with
APRA and ASIC in an open, constructive and cooperative way. Breach
of these obligations can result in a person becoming disqualified
from being an accountable person.
[Sections 21 and 42 of the Financial
Accountability Regime Bill 2023]
1.48 A person is an accountable person if the person:
· holds a position in an accountable entity or a significant related entity of an accountable entity; and
·
has senior executive responsibility for management or control of
the accountable entity or a significant or substantial part or
aspect of the operations of the accountable entity or the
accountable entity and its group of significant related
entities.
[Subsections 10(1) and (6) of the
Financial Accountability Regime Bill 2023]
1.49 An accountable person also includes a person who:
· holds a position in an accountable entity that is of a kind prescribed in the rules made by the Minister; or
·
has a prescribed responsibility in or in relation to an accountable
entity as specified in the rules made by the Minister.
[Subsections 10(2) to (4) of the Financial
Accountability Regime Bill 2023]
1.50
Accountable persons with specified responsibilities will primarily
be persons appointed or employed by an accountable entity or its
significant related entity, but could also include contractors and
independent service providers (such as a consultant in charge of
human resources for an accountable entity).
[Subsections 10(2) to (4) of the Financial
Accountability Regime Bill 2023]
1.51
The rules made by the Minister may identify a kind of
responsibility or position by reference to the level or area of
responsibility. The rules may identify responsibilities within all
or a class of entities that are subject to the Financial
Accountability Regime.
[Subsections 10(2) to (4) of
the Financial Accountability Regime Bill 2023]
1.52 One person can be an accountable person of multiple accountable entities and can hold multiple prescribed responsibilities or positions listed in the rules made by the Minister. An accountable person may also be employed by a body other than the accountable entity or one of its significant related entities.
1.53 In practice, accountable persons will typically include the directors and senior executives of an entity, such as the Chief Executive Officer and officers reporting directly to the Chief Executive Officer. Lower-level executives are generally not expected to be accountable persons under the Financial Accountability Regime.
1.54
For a foreign accountable entity in the banking or insurance
industries, the accountable person’s responsibilities will
relate to the Australian branch of the entity, rather than to the
entity as a whole.
[Subsection 10(5) of the Financial
Accountability Regime Bill 2023]
1.55 Despite the above, the Regulator can exclude certain responsibilities from the obligations under the Financial Accountability Regime. This means that persons with only those excluded responsibilities or positions will not be accountable persons. This Regulator can provide for the exclusions:
· in relation to a particular entity - by written notice to the entity; or
·
in relation to a class of entities - by rules made by the
Regulator.
[Subsections 11(1) to (4) of the Financial
Accountability Regime Bill 2023]
1.56
The written notice by the Regulator is not a legislative
instrument.
[Subsection 11(5) of the Financial
Accountability Regime Bill 2023]
Obligations of accountable persons under the Financial Accountability Regime
1.57
The Financial Accountability Regime sets out accountability
obligations for accountable persons that relate to both
conduct-related and prudential matters.
[Sections 18 and 21 of the Financial
Accountability Regime Bill 2023]
1.58
An accountable person is required to act with honesty and
integrity, and with due skill, care and diligence. The person must
also act in a manner that prevents actual or likely adverse impact
to their accountable entity’s prudential standing, where
standing is considered within the entity’s industry as well
as among the general public.
[Paragraphs 21(1)(a) and (c)
of the Financial Accountability Regime Bill 2023]
1.59 The accountability obligations of accountable persons extend beyond those in the Banking Executive Accountability Regime by:
·
extending the requirement for accountable persons to deal in an
open, constructive and cooperative way with both APRA and ASIC;
and
[Paragraph 21(1)(b) of the Financial
Accountability Regime Bill 2023]
·
introducing a new obligation for accountable persons to take
reasonable steps to prevent matters from arising that would (or
would be likely to) result in a material contravention by their
accountable entity of certain financial sector laws.
[Paragraph 21(1)(d) of the Financial
Accountability Regime Bill 2023]
1.60
The Financial Accountability Regime Bill 2023 provides guidance on
what amounts to taking reasonable steps to support proactive
compliance by accountable persons and accountable entities. This
includes taking appropriate action both to prevent, and in response
to, non-compliance or suspected non-compliance rather
than a set-and-forget attitude.
[Section 22 of the Financial
Accountability Regime Bill 2023]
1.61 The new obligation for accountable persons to take reasonable steps to prevent breaches of certain financial sector laws will only be triggered by material and significant breaches. The focus on significant contraventions ensures an accountable person does not face unduly serious consequences for involvement in occasional minor or technical contraventions.
1.62 However, a large number or repeated occurrence of minor breaches could indicate a systemic issue of non-compliance which could amount to a material contravention. Similarly, taking reasonable steps to prevent a material contravention does not mean an accountable person can operate or set up compliance systems that allow non-material breaches.
1.63 An accountable person would only be required to take reasonable steps to ensure compliance by the accountable entity with the certain financial sector laws that are relevant to their area of responsibility.
1.64
An accountable person will be held accountable to the extent they
were involved in and responsible for a contravention of obligations
under the Financial Accountability Regime. If multiple accountable
persons have the same responsibility for the same accountable
entity, each person is liable for any breaches in relation to that
responsibility. This approach is to prevent accountable persons
from avoiding their obligations under the regime by shifting
responsibility to other accountable persons.
[Subsection 21(2) of the Financial
Accountability Regime Bill 2023]
1.65 An accountable person must comply with each of their accountability obligations. For instance, not acting with due diligence would result in the accountable person failing to meet their accountability obligations.
1.66
If an accountable person fails to comply with any of these
obligations, their variable remuneration will need to be reduced by
the accountable entity or significant related entity by an amount
proportionate to the failure.
[Subsection 25(1) of the Financial
Accountability Regime Bill 2023]
1.67
Failure to comply with an obligation may also result in the
Regulator taking other enforcement actions under the Financial
Accountability Regime. For example, the Regulator could seek to
disqualify someone from being an accountable person or could seek
to have an accountable person’s responsibilities
reallocated.
[Sections 42 and 65 of the
Financial Accountability Regime Bill 2023]
1.68
However, protections for whistle-blowers under Part 9.4AAA of the
Corporations Act will be available in relation to the
Financial Accountability Regime.
[Schedule
1, item 31 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; Section 1317AA of the Corporations
Act]
Obligations of accountable entities under the Financial Accountability Regime
1.69
The obligations for accountable entities under the Financial
Accountability Regime relate to both conduct and prudential
matters.
[Section 20 of the Financial
Accountability Regime Bill 2023]
1.70
Accountable entities must comply with each of their accountability
obligations, key personnel obligations, deferred remuneration
obligations, and notification obligations (as described
below).
[Subsection 15(1) of the Financial
Accountability Regime Bill 2023]
1.71
If an accountable entity fails to comply with an obligation, it may
be subject to a civil penalty of up to 50,000 penalty units, three
times the value of the benefit derived or detriment avoided by the
entity, or 10 per cent of the entity’s annual turnover
up to 2.5 million penalty units for each contravention (for more
detail, see the sections below on civil penalties).
[Sections 80 to 83 of the Financial
Accountability Regime Bill 2023]
1.72
Contravention may also result in other enforcement action being
taken in relation to the accountable entity. For example, the
Regulator may enter an enforceable undertaking with the entity, or
issue a direction to it, to resolve non-compliance. APRA and ASIC
may also be able to take enforcement action under other relevant
legislation, such as the Banking Act 1959 .
[Part 4 of Chapter 3 of the Financial
Accountability Regime Bill 2023]
Accountability obligations of accountable entities
1.73
An accountable entity must take reasonable steps to conduct its
business with honesty and integrity, with due skill, care and
diligence, and in a manner that prevents actual or likely adverse
impact on its prudential standing and reputation.
[Paragraphs 20(a) and (c) of the
Financial Accountability Regime Bill 2023]
1.75
The Financial Accountability Regime accountability obligations
extend beyond those currently in the Banking Executive
Accountability Regime: an accountable entity must take reasonable
steps to deal in an open, constructive and cooperative way with
both APRA and ASIC.
[Paragraph 20(b) of the Financial
Accountability Regime Bill 2023]
1.76 An accountable entity is also required to take reasonable steps to ensure that:
·
its accountable persons comply with their own accountability
obligations; and
[Paragraph 20(d) and section 21 of
the Financial Accountability Regime Bill 2023]
·
its significant related entities comply with the accountability
obligations of an accountable entity as if it were an accountable
entity.
[Paragraph 20(e) of the Financial
Accountability Regime Bill 2023]
1.77 An accountable entity must comply with each obligation. For instance, not acting with due skill would result in the accountable entity failing to meet its accountability obligations. The obligations are designed to complement and support the obligations under other legislative requirements (such as the general obligations under section 912A of the Corporations Act and the obligations under section 52 of the Superannuation (Industry Supervision) Act 1993 ).
Key personnel obligations of accountable entities
1.78
The Financial Accountability Regime requires an accountable entity
to ensure that the responsibilities of relevant accountable persons
collectively cover all parts or aspects of its business, including
the business of its relevant group.
[Paragraph 23(1)(a) of the Financial
Accountability Regime Bill 2023]
1.79
This obligation includes having accountable persons who are
responsible for each of the responsibilities and positions
prescribed in the rules made by the Minister.
[Subparagraphs 23(1)(a)(ii) and (iii)
of the Financial Accountability Regime Bill 2023]
1.80
An accountable entity must comply with any directions given by the
Regulator and take steps to ensure that its significant related
entities do the same.
[Paragraphs 23(1)(c) and (d) of the
Financial Accountability Regime Bill 2023]
1.81
An accountable entity must ensure each of its accountable persons
and those of its significant related entities have not been
disqualified from being accountable persons by the Regulator.
[Paragraphs 23(1)(b) and 24(1)(b) of
the Financial Accountability Regime Bill 2023]
1.82
Accountable entities are not required to have accountable persons
for responsibilities which have been excluded by the
Regulator.
[Subsection 23(2) of the Financial
Accountability Regime Bill 2023]
1.83
Foreign accountable entities in the banking and insurance
industries are only required to comply with the key personnel
obligations in relation to the operations of their Australian
branches.
[Subsection 23(3) of the Financial Accountability
Regime Bill 2023]
Timing of key personnel obligations
1.84 Generally, an accountable entity must ensure each of its accountable persons and those of its significant related entities are registered with the Regulator before the person starts occupying a role as an accountable person. [Paragraph 23(1)(b) and section 24 of the Financial Accountability Regime Bill 2023]
1.85 However, to support accountable entities to comply with the key personnel obligations, and to promote efficient practices, the Financial Accountability Regime provides flexibility for:
· temporary and unforeseen vacancies;
· directors appointed at general meetings; and
·
new entities entering the industry.
[Subsections 24(2) to (7) of the
Financial Accountability Regime Bill 2023]
1.86
Accountable persons filling temporary vacancies or unforeseen
vacancies have up to 90 days after becoming an accountable
person to be registered. This grace period applies where the
incumbent position-holder is expected to return, or there is
intention to make a permanent appointment, within 90 days of the
position becoming vacant. This can include situations where an
individual is temporarily replacing an accountable person due to
illness, or an individual fulfils a vacancy on a temporary basis
until a new permanent accountable person is appointed.
[Subsection 24(2) of the Financial
Accountability Regime Bill 2023]
1.87 Appointing an accountable person to fill a permanent position on a fixed-term contract will not constitute a temporary vacancy to which this longer period for registration will apply (the vacancy itself must be temporary).
1.88
An accountable person who is appointed as director of an
accountable entity at a general meeting has up to 30 days to be
registered. This approach simplifies the registration process as
the entity has 30 days after the successful candidate is appointed
to register them as an accountable person, rather than having to
submit applications ahead of the meeting for all candidates, only
to later retract those of the unsuccessful candidates.
[Subsection 24(3) of the Financial Accountability
Regime Bill 2023]
1.89
An entity that becomes an accountability entity after the
application of the Financial Accountability Regime to the industry
the entity is licensed for will have 30 days to register their
accountable persons. The 30-day time period commences from the date
the entity becomes an accountable entity. This 30-day period does
not apply to entities when they are renewing a licence.
[Subsection 24(4) of the Financial Accountability
Regime Bill 2023]
1.90 These longer periods for registration are intended to support compliance with the obligations in the Financial Accountability Regime and should not be used to avoid registration or notification obligations.
1.91 The Regulator can adjust these longer periods for registration:
· for an individual entity - by written notice to the entity; or
·
for a class of entities - by Regulator rules.
[Subsections 24(2) and (5) of the
Financial Accountability Regime Bill 2023 ]
1.92
The Regulator can adjust the period for registration to a longer or
shorter period. A decision to shorten the period by written notice
is a reviewable decision and is therefore subject to
reconsideration by the Regulator, and to review by the
Administrative Appeals Tribunal (see below for more on reviewable
decisions and merits review).
[Subsections 24(2) to (6) and section 91 of the
Financial Accountability Regime Bill 2023]
1.93
A written notice setting out the Regulator’s determination of
a new period for a particular entity prevails over rules which
would also apply to the entity .
[Subsection 24(6) of the Financial
Accountability Regime Bill 2023]
Deferred remuneration obligations of accountable entities
1.94 The Financial Accountability Regime requires accountable entities to control payment of an accountable person’s variable remuneration, such as bonuses and incentive payments, in various ways.
1.95 Specifically, the Financial Accountability Regime obliges each accountable entity to:
· have a remuneration policy that requires the variable remuneration of an accountable person to be reduced if they fail to comply with their accountability obligations;
·
take reasonable steps to ensure that their
significant related entities comply with the above .
[Subsection 25(1) and sections 27 and
28 of the Financial Accountability Regime Bill 2023]
1.96 The requirement to defer variable remuneration ensures that accountable persons have clear incentives to promote effective risk management when making decisions which have longer-term impacts. It also ensures that accountable persons are properly held to account for decisions that have negative future consequences.
1.97
In the event of contravention, the amount an accountable
person’s variable remuneration is reduced by is determined by
the relevant accountable entity or significant related entity. The
amount of the reduction must be proportionate to the accountable
person’s failure to comply with the person’s
obligations. The reduction does not need to relate to the period in
which the failure occurred, and the accountable person may not have
any variable remuneration left after the reduction.
[Subsection 25(2) of the Financial Accountability
Regime Bill 2023]
1.98
The deferred remuneration obligations under the Financial
Accountability Regime apply to variable remuneration, which is
remuneration conditional on the accountable person achieving
particular objectives such as performance metrics and service
requirements.
[Paragraph 26(1)(a) of the Financial
Accountability Regime Bill 2023]
1.99
The deferred remuneration obligations apply to variable
remuneration paid in cash and also other forms of remuneration such
as shares and options.The obligations also apply to remuneration
paid directly by the accountable entity and other entities in the
corporate group to which the accountable entity belongs.
[Subsection 25(3) of the Financial
Accountability Regime Bill 2023]
1.100
The deferred remuneration obligations will apply in relation to
variable remuneration paid by other entities in a corporate group
only if it is wholly or partly related to the person’s work
performing the role of an accountable person.
[Subsection 25(3) of the Financial
Accountability Regime Bill 2023]
1.101 The Regulator can also determine certain types of remuneration to be included or excluded from the deferred remuneration obligations. The Regulator is able to do this:
· for an individual entity - by written notice to the entity and each accountable person who is impacted; or
·
for a class of entities - by making Regulator rules.
[Paragraph 26(1)(b) and subsections
26(2) to (4) and (7) of the Financial Accountability Regime Bill
2023]
1.103
Written notice of a determination that particular remuneration is
or is not variable remuneration is not a legislative
instrument.
[Subsection 26(6) of the Financial
Accountability Regime Bill 2023]
1.104
Decisions of the Regulator relating to a determination of variable
remuneration by written notice are subject to reconsideration by
the Regulator, and to review by the Administrative Appeals
Tribunal.
[Subsection 26(3) and section 91 of
the Financial Accountability Regime Bill 2023]
Minimum amount of variable remuneration to be deferred
1.105
Generally, the deferred remuneration obligations under the
Financial Accountability Regime requires at least 40 per cent
of an accountable person’s variable remuneration for the
relevant financial year to be deferred. The meaning of financial
year is specific to each accountable entity.
[Subsections 27(1) and (7) and the
definition of ‘financial year’ in section 8 of the
Financial Accountability Regime Bill 2023]
1.106
The value of a person’s variable remuneration that is
deferred will generally be the value of the remuneration if it had
been paid to the person at the start of the deferral period.
However, the Regulator will have power to determine or prescribe an
alternative way to work out that value.
[Subsections 27(2) and (3) of the
Financial Accountability Regime Bill 2023]
1.107
The Regulator’s power to make determinations and rules can be
used for particular forms of remuneration such as shares and
options. If the Regulator exercises such power, the value of a
person’s variable remuneration that is deferred is worked out
based on the written determination from the Regulator (if
applicable in relation to a specific entity) or on the basis of
rules made by the Regulator in relation to a class of entities (if
applicable).
[Subsections 27(2) to (5) of the
Financial Accountability Regime Bill 2023]
1.108
The Regulator must provide a copy of a determination to each
accountable person who is impacted by it at the time of the
determination. A person who becomes an accountable person after the
determination is made and is impacted by it must be notified of the
determination by the relevant accountable entity or significant
related entity.
[Subsections 27(4) and (5) of the
Financial Accountability Regime Bill 2023]
1.109
Written notice of a determination of how to calculate the minimum
amount of variable remuneration to be deferred is not a legislative
instrument.
[Subsections 27(6) of the Financial
Accountability Regime Bill 2023]
1.110
Decisions of the Regulator relating to variable remuneration are
subject to reconsideration by the Regulator, and to review by the
Administrative Appeals Tribunal.
[Subsection 27(3) and section 91 of the
Financial Accountability Regime Bill 2023]
Minimum period of deferral
1.111
Generally, the deferred remuneration obligation under the Financial
Accountability Regime requires an accountable person’s
variable remuneration to be deferred for at least four years.
[Subsections 28(1) to (4) of the
Financial Accountability Regime Bill 2023]
1.112 The minimum deferral period may be shorter than four years:
· if a person stops being an accountable person due to death, or serious illness, disability or incapacity; or
·
if the Regulator determines other circumstances allowing for a
shorter deferral period, either by written notice for a particular
entity or by Regulator rules for a class of entities.
[Subsections 28(4) and (5) of the
Financial Accountability Regime Bill 2023]
1.113
An accountable person may have a shorter minimum deferral period on
the occurrence of one of the listed circumstances without approval
from the Regulator. However, the shorter minimum deferral period
will not end until the accountable entity is reasonably satisfied
that the person has complied with their accountability obligations,
based on information available at the time. If the accountable
entity is never so satisfied, the default approach of four years
applies, and the amount of deferred remuneration may be reduced by
an amount proportionate to the failure to meet the accountability
obligations.
[Subsection 28(4) of the Financial Accountability
Regime Bill 2023]
1.114 The deferral period will start on the later of:
· the day after the day on which the decision was first made for the accountable person to be able to earn the amount of variable remuneration; or
·
the first day of the performance period, if the variable
remuneration is measured by reference to that period.
[Subsection 28(2) of the Financial
Accountability Regime Bill 2023]
1.115
If the variable remuneration is remuneration of a kind determined
by the Regulator or prescribed by rules made by the Regulator, then
the deferral period may start on the day determined by the
Regulator.
[Subsection 28(3) of the Financial
Accountability Regime Bill 2023]
1.116 The deferral period is intended to be consistent with provisions of APRA’s prudential standard to regulate remuneration in regulated industries ( Prudential Standard CPS 511 Remuneration ), that also requires deferral of variable remuneration for an overlapping class of persons in those industries. This approach will provide for consistent compliance requirements under the two frameworks.
1.117
If an accountable entity discovers that an accountable person is
likely to have breached their accountability obligations during the
deferral period, then the deferral period will be extended until
such time as the entity completes its investigation of the breach.
[Subsection 28(4) of the Financial Accountability
Regime Bill 2023]
1.118 Written notice of a determination of a deferral period by the Regulator is not a legislative instrument.
[Subsection 28(6) of the Financial Accountability Regime Bill 2023]
Circumstances where the deferred remuneration obligations do not apply
1.119
The deferred remuneration obligations do not apply to an
accountable person whose deferred variable remuneration in a
particular financial year for the accountable person’s entity
would be less than a certain threshold. The threshold is set at
$50,000, unless the Minister has made rules prescribing a different
amount.
[Section 29 of the Financial
Accountability Regime Bill 2023]
1.120
The deferred remuneration obligations do not apply to an
accountable person while the person is filling a temporary or an
unforeseen vacancy, who is not registered or required to be
registered under the Financial Accountability Regime because they
only hold the position for 90 days or less.
[Section 30 of the Financial Accountability
Regime Bill 2023]
1.121 The deferred remuneration requirements do not apply to ordinary salary and wages, to an accountable person whose total remuneration does not include any variable remuneration, nor to variable remuneration which relates to other work an accountable person may have performed outside their role as an accountable person.
Notification obligations of accountable entities
1.122 The Financial Accountability Regime requires an accountable entity to provide the Regulator with particular information about the entity and its accountable persons.
1.123
All accountable entities are required to comply with the core
notification obligations, while a subset of entities is required to
comply with the enhanced notification obligations. These
obligations are important to ensure the Regulator has up to date
information about the nature and influence of entities and persons
who are subject to the Financial Accountability Regime.
[Section 31 of the Financial
Accountability Regime Bill 2023]
Core notification obligations that apply to all accountable entities
1.124
Each accountable entity must notify the Regulator of certain events
relating to the accountable persons of the entity, as well as to
certain breaches of obligations under the Financial Accountability
Regime by the entity or its accountable persons.
[Paragraph 31(1)(a) and section 32 of the
Financial Accountability Regime Bill 2023]
1.125 There are two new events that must be notified to the Regulator beyond the events requiring notification under the Banking Executive Accountability Regime. They are when:
· the accountable entity has reasonable grounds to believe that it has breached its key personnel obligations; and
·
a material change occurs to information about an accountable person
on the register of accountable persons.
[Subparagraph 32(d)(i) and paragraph
32(e) of the Financial Accountability Regime Bill 2023]
1.126
The Financial Accountability Regime also requires accountable
entities to take reasonable steps to ensure their significant
related entities comply with these requirements as if they were
accountable entities.
[Paragraph 31(1)(b) of the Financial
Accountability Regime Bill 2023]
1.127
Generally, the notification must be provided within 30 days of the
event occurring. The notice must be provided using the form
approved by the Regulator.
[Subsections 31(6) and (7) of the
Financial Accountability Regime Bill 2023]
1.128
The Regulator can adjust this compliance period in the Regulator
rules.
[Paragraph 31(6)(b) of the Financial
Accountability Regime Bill 2023]
Enhanced notification obligations - accountability statements and maps
1.129
In addition to the core notification obligations, accountable
entities that meet an enhanced notification threshold are required
to provide the Regulator with an accountability
statement for each of the entity’s accountable
persons and an accountability map .
[Subsection 31(2) of the Financial
Accountability Regime Bill 2023]
1.130 An accountability statement is a document that contains:
· a comprehensive statement of the accountable person’s responsibilities, and any other matters determined in the Regulator rules; and
·
a declaration by the accountable person that the content of the
statement is accurate, and that the person understands their
accountability obligations.
[Section 33 of the Financial
Accountability Regime Bill 2023]
1.131
An accountability map is a document outlining all the accountable
persons in a group comprised of the accountable entity and its
significant related entities, the responsibilities of each
accountable person and the lines of reporting and responsibility
between those accountable persons, and any other matters determined
in the Regulator rules.
[Section 34 of the Financial
Accountability Regime Bill 2023]
1.132
The Minister can make rules to prescribe the threshold for
determining which accountable entities will need to comply with the
enhanced notification requirements. Despite subsection 14(2) of the
Legislation Act 2003 , these rules may incorporate a matter
contained in an instrument or writing as in force or existing from
time to time if it is published on a website maintained by the
Regulator. That is, the incorporation of certain documents by
reference will not be limited to the instrument as at the date of
incorporation. This is necessary to ensure that the rules align
with current standards or guidance.
[Subsections 31(3) to (5) of the Financial
Accountability Regime Bill 2023]
1.133
The rules can only incorporate material as it exists from time to
time from non-legislative instruments if that material is published
by APRA and ASIC on their websites. This limitation will ensure
only credible, relevant, readily available material may be
incorporated.
[Subsections 31(3) to (5) of
the Financial Accountability Regime Bill 2023]
1.134
The accountability statement of an accountable person must
accompany the person’s application for registration.
[Paragraph 41(2)(d) of the Financial
Accountability Regime Bill 2023]
1.135
An accountability map must be provided to the Regulator within 30
days of an entity becoming subject to the Financial Accountability
Regime, or within the period set in the Regulator rules.
[Paragraph 31(2)(c)
and subsection 31(5) of the Financial Accountability Regime
Bill 2023]
1.136
Generally, an accountable entity must ensure the Regulator is
notified of any material change to the accountability map and
accountability statement(s) within 30 days of the change occurring.
The Regulator rules can prescribe a different period for
compliance.
[Paragraphs 31(2)(b) and (d) of
the Financial Accountability Regime Bill 2023]
1.137
The Financial Accountability Regime also requires accountable
entities to take reasonable steps to ensure their significant
related entities provide accountability statements and update the
Regulator of material changes as if they were accountable
entities.
[Paragraph 31(2)(e) of the Financial
Accountability Regime Bill 2023]
1.138 The Banking Executive Accountability Regime required all ADIs to provide accountability maps and statements to APRA, and to notify APRA of all changes to accountability maps and statements. The Financial Accountability Regime reduces the regulatory burden and compliance costs by only requiring accountable entities that meet the enhanced notification threshold to prepare and submit accountability maps and statements and to notify the Regulator of material changes to these documents. The Regulator may provide guidance on what constitutes material changes.
Circumstances where accountable entities and accountable persons are not subject to the obligations of the Financial Accountability Regime
1.139
The Minister has the power to exempt a particular accountable
entity or a class of entities from the obligations of the Financial
Accountability Regime. Where this is done, those obligations will
not apply to that accountable entity, to any of its significant
related entities, or to an accountable person of the entity .
[Paragraph 15(2)(a), section 16 and subsection
18(2) of the Financial Accountability Regime Bill 2023]
1.140 The power to exempt an accountable entity or a class of accountable entities from the Financial Accountability Regime is required to ensure the regime applies appropriately to the regulated industries and to avoid any potential unintended consequences from the application of the regime.
1.141 This power ensures that the regime can operate flexibly and be appropriately targeted. For instance, there may be instances where the Financial Accountability Regime may act as a barrier to entry for some small new entrants and the ability to exempt entities or classes of entities from the regime may facilitate competition in the market.
1.142 The exemption power is broadly framed to avoid constraining relevant considerations due to the diversity of industries regulated by the Financial Accountability Regime, and the complexity and unforeseen nature of the issue the exemption power is seeking to address.
1.143
The Minister may only exempt an accountable entity or a class of
accountable entities if the Minister is satisfied that it would be
unreasonable for that entity or class of entities to be required to
comply with the obligations of the Financial Accountability
Regime.
[Subsections 16(2) and 16(5) of the
Financial Accountability Regime Bill 2023]
1.144
To exempt an accountable entity, the Minister makes a notifiable
instrument. The exemption must include a statement setting out the
reasons for the making of the instrument.
[Subsections 16(1) and 16(3) of the
Financial Accountability Regime Bill 2023]
1.145
To exempt a class of entities, the Minister makes a legislative
instrument. Such instruments are subject to Parliamentary
disallowance.
[Subsection 16(4) of the Financial
Accountability Regime Bill 2023]
1.146 This approach ensures exemptions are made through formal, publicly available instruments. Exemption of a class of entities is by legislative instrument, rather than notifiable instrument, as it is of greater significant for operation and scope of the regime than exemption of a particular accountable entity.
1.147
The obligations of the Financial Accountability Regime apply to a
foreign accountable entity (in the banking or insurance
industries), but only to the operations of the entity’s
branch in Australia. The obligations apply to the same extent to an
accountable person of such an entity or any of its significant
related entities.
[Paragraph 15(2)(b) and subsection
18(2) of the Financial Accountability Regime Bill 2023]
1.148
An accountable entity or an accountable person can be exempted from
a particular obligation of the Financial Accountability Regime if
the Regulator is satisfied that complying with the obligation would
breach a foreign law. The Regulator must provide written notice to
the accountable person or entity to exempt them from that
obligation.
[Subsections 15(3), and 18(4) and
sections 17 and 19 of the Financial Accountability Regime Bill
2023]
1.149
Certain decisions of the Regulator relating to these exemptions are
subject to reconsideration by the Regulator, and to review by the
Administrative Appeals Tribunal (see below for more on reviewable
decisions and merits review).
[Sections 17, 19 and 91 of the
Financial Accountability Regime Bill 2023]
Administration of the Financial Accountability Regime
General administration
1.150
The Financial Accountability Regime will be administered and
enforced by both APRA and ASIC. This will ensure the regime is
regulated from both a prudential perspective as well as a conduct
and consumer outcomes-based perspective.
[Section 36 of the Financial
Accountability Regime Bill 2023; Schedule 1, items 1 and 16 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023, section 3 of the Australian Prudential Regulation Authority
Act 1998 and section 12A of the Australian Securities and
Investments Commission Act 2001]
1.151
ASIC will only exercise regulatory and enforcement powers under the
Financial Accountability Regime in relation to an accountable
entity that has either an Australian financial services licence or
an Australian credit licence, its significant related entities, and
accountable persons of these entities. The Financial Accountability
Regime Bill 2023 identifies which provisions this limitation
applies to. However, ASIC will be able to maintain the register of
accountable persons, share information, and make legislative
instruments (Regulator rules) with APRA in relation to all
accountable entities and persons.
[Section 36 of the Financial
Accountability Regime Bill 2023]
1.152
To ensure a cohesive approach, APRA and ASIC must enter into an
arrangement outlining their general approach to administering and
enforcing the Financial Accountability Regime within 6 months of
the commencement of the Financial Accountability Regime Bill 2023.
If this does not occur, the Minister may determine an arrangement
for this purpose.
[Section 37 of the Financial
Accountability Regime Bill 2023]
1.153
APRA and ASIC are required to reach agreement before exercising
certain powers or performing certain functions under the Financial
Accountability Regime except in administering the Register of
accountable persons, sharing information, and for certain
compliance and enforcement decisions.
[Section 38 of the Financial
Accountability Regime Bill 2023]
1.154
A failure by the Regulators to enter into an arrangement relating
to the administration of the Act, to reach an agreement, or a
failure by ASIC to adhere to the scope of its enforcement powers
towards certain entities, does not invalidate the performance or
exercise of the relevant function or power.
[Subsections 36(2), 37(5)
and 38(4) of the Financial Accountability Regime Bill
2023]
1.155 The no-invalidity clauses are necessary to provide certainty to regulated entities regarding the performance or exercise of a function or power under the Financial Accountability Regime and to ensure the enforcement of the regime is not compromised. The enforcement powers of the Financial Accountability Regime are designed to combat serious regulatory issues such as prudential risk to the Australian financial system or significant and systemic consumer harms. As such, invalidity of regulatory action due to a Regulator’s failure to comply with certain procedural matters could cause significant harm to consumers.
1.156
The no-invalidity clauses are designed to ensure regulatory
certainty while forming part of a balanced regulatory framework
which includes redress mechanisms which may apply to the regulatory
action. The Financial Accountability Bill 2023 expressly
provides for merits review of certain decisions made under the
regime by the Administrative Appeals Tribunal. Judicial review of
an exercise of power or performance of function by APRA or ASIC is
also available, unless on the grounds of jurisdictional error
solely in relation to one Regulator not having the other’s
agreement to act, or their arrangement for administration not being
in place or available on their website.
[Section 95 of the Financial
Accountability Regime Bill 2023]
Information sharing and protections
1.157
APRA and ASIC may share information that is obtained, produced, or
disclosed for the purposes of the Financial Accountability Regime
Bill 2023. APRA and ASIC are also required to share certain
information necessary to enable the joint administration and
enforcement of the regime. These arrangements are in addition to
information-sharing frameworks available to APRA and ASIC
under other legislation.
[Section 39 of the Financial
Accountability Regime Bill 2023]
1.158
One regulator does not need to notify any person that it plans to,
or has, shared information with the other regulator. This will
enable APRA and ASIC to efficiently perform their functions as
joint regulators for the Financial Accountability Regime. While the natural justice hearing rule will not
apply to the act of information sharing between the regulators,
this is a limited restriction as procedural fairness will still be
afforded in relation to uses of the shared information. This
approach ensures the interests of affected persons are taken into
account in making substantive decisions .
[Subsection 39(5) of the Financial
Accountability Regime Bill 2023]
1.159
Disclosure of information under this information sharing power
constitutes an authorisation by an Australian law for the purpose
of Australian Privacy Principle 6 of the Privacy Act 1988.
[Subsection 39(6) of the
Financial Accountability Regime Bill 2023; Schedule 1, item 11 of
the Financial Accountability Regime (Consequential Amendments) Bill
2023]
1.161
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 achieves this by amending relevant
definitions of protected information , protected
document , and prudential regulation framework
law to include information obtained or disclosed under the
Financial Accountability Regime. Schedule 1 to the Financial
Accountability Regime (Consequential Amendments) Bill 2023 also
introduces a prohibition into the Australian Securities and
Investments Commission Act 2001 to protect against the
disclosure of information that is protected information because of
the Financial Accountability Regime.
[Schedule 1, items 1, 5 to 11, 16 and
17 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; sections 3 and 56 of the Australian
Prudential Regulation Authority Act 1998; sections 12A and 127 of
the Australian Securities and Investments Commission Act
2001]
1.162
Exemptions to the secrecy provisions will allow for the appropriate
sharing of information by APRA and ASIC. A defendant bears an
evidential burden in relation to sharing of information on the
reliance of these exemptions. Shifting the evidential burden to the
person who disclosed the information is justified and not unduly
onerous as the information subject to the new provisions would be
peculiarly within the knowledge and control of the defendant.
[Schedule 1, items 1, 5 to 11, 16 and 17
of the Financial Accountability Regime (Consequential Amendments)
Bill 2023; sections 3 and 56 of the Australian Prudential
Regulation Authority Act 1998; sections 12A and 127 of the
Australian Securities and Investments Commission Act
2001]
1.163
The amendments to the secrecy obligations will apply regardless of
whether the information was obtained before or after the
commencement of the Financial Accountability Regime.
[Schedule 1, item 20 and Schedule 2, item
31 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; section 340 of the Australian Securities and
Investments Commission Act 2001]
1.164
Information obtained or disclosed under the Financial
Accountability Regime that is protected information (as defined by
the enabling legislation for APRA and ASIC) will be exempt from the
Freedom of Information Act 1982 . This exemption already
exists for protected information held by APRA. Schedule 1 to the
Financial Accountability Regime (Consequential Amendments) Bill
2023 extends the exemption to also cover information obtained or
disclosed under the Financial Accountability Regime that is held by
ASIC.
[Schedule 1, item 17 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023, section
127 of the Australian Securities and Investments Commission
Act 2001; Schedule 1, items 1 and 5 to 9 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
56(11) of the Australian Prudential Regulation Authority Act
1998]
Registration of accountable persons
1.165
APRA and ASIC must jointly establish and maintain a register of
accountable persons covered by the Financial Accountability Regime.
The register will enable clear oversight of the accountable persons
of each accountable entity and its significant related entities.
The register will include details in relation to each accountable
person’s role, for example, name and date of
registration.
[Section 40 of the Financial
Accountability Regime Bill 2023]
1.166
Information from the register may be made public at the discretion
of APRA and ASIC. This allows the regulators to balance the need
for confidentiality of sensitive information about financial
services businesses with the need for public accountability and
transparency.
[Subsection 40(5) of the
Financial Accountability Regime Bill 2023]
1.167 To register an accountable person, their accountable entity must:
· submit a complete application in the approved form to the Regulator;
· give a signed declaration the accountable entity is satisfied the person is suitable to be an accountable person; and
· if the accountable entity meets the enhanced notification threshold - provide an accountability statement for the accountable person. [Subsection 41(2) of the Financial Accountability Regime Bill 2023]
1.168
The Regulator can request further information in relation to an
application from the accountable entity. The accountable entity
must comply with the request.
[Paragraph 20(b) and subsection 41(3)
of the Financial Accountability Regime Bill 2023]
1.169
Where a person is an accountable person of multiple accountable
entities, the person must be registered by each accountable
entity .
[Paragraph 24(1)(a) and
subsection 41(1) of the Financial Accountability Regime Bill
2023]
1.170
The Regulator is required to register an accountable person within
the later of 21 days after an application is made, or 21 days after
the day that any further requested information is given to the
Regulator by the accountable entity.
[Subsections 41(4) and (5) of the
Financial Accountability Regime Bill 2023]
Ensuring compliance of the obligations imposed under the Financial Accountability Regime
Information-gathering powers
1.171
The Regulator may request information from accountable entities,
significant related entities or accountable persons, for the
purpose of administering or enforcing the Financial Accountability
Regime. The information requested may relate to any entity or
person that may be regulated under the regime, or to the related
body corporate or connected entity of a regulated entity.
[Subsections 62(1) to (3) of the
Financial Accountability Regime Bill 2023]
1.172
The request must be made in accordance with certain requirements as
to its purpose and content. It may be fulfilled in hard copy or
electronic form, consistent with standard practice.
[Subsections 62(4) to (6) of the
Financial Accountability Regime Bill 2023]
1.173 This provision is similar to APRA’s existing information-gathering powers in section 62 of the Banking Act 1959 , with necessary changes to tailor the provision to the Financial Accountability Regime.
1.174
Failing to comply with a request for information is an offence
subject to a maximum penalty of 200 penalty units (see below for
more on the offence provisions under the Financial Accountability
Regime).
[Section 63 of the Financial
Accountability Regime Bill 2023]
Investigation powers
1.175 The Regulator has powers to investigate an accountable entity or its significant related entity if the Regulator has reason to believe the entity or an accountable person of the entity may have contravened obligations under the Financial Accountability Regime. These powers are similar to those in Part VIII of the Banking Act 1959 , with necessary changes to ensure the provisions are tailored to the regime.
1.176
The Regulator commences an investigation by appointing an
investigator. The investigator can delegate any or all of their
powers and functions to APRA or ASIC staff members, to assist with
the investigation.
[Section 45 of the Financial
Accountability Regime Bill 2023]
1.177
The standard requirements for appointments made by APRA to be made
by certain people (such as a chair of APRA) do not apply to the
appointment of investigators or other appointments under the
Financial Accountability Regime.
[Schedule 1, items 2 and 3 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 48 of the Australian Prudential Regulation
Authority Act 1998]
1.178 The Regulators may act cooperatively as the investigation is carried out. However, the single investigator will lead the conduct of the investigation.
1.179
The investigated entity is required to assist the investigation by
providing access to information including books, accounts and
documents, that are relevant to the investigation. The investigator
may also require any person to produce such materials if they have
reasonable grounds to believe that the person has knowledge of or
access to the information. Materials may be provided in hard copy
or electronic form.
[Section 46 and subsection 47(1)
of the Financial Accountability Regime Bill 2023]
1.180
An investigator may, by written notice, require the person to
produce any or all relevant documents within a certain time period,
but must provide at least 14 days’ notice.
[Subsection
47(2) of the Financial Accountability Regime Bill 2023]
1.181
It is an offence not to provide information or access to materials
relevant to an investigation when required to do so by the
investigator. The maximum penalty for such non-compliance is 50
penalty units for the entity being investigated, and 30 penalty
units for other persons. The different penalties are appropriate as
entities regulated under the Financial Accountability Regime should
be more familiar with its operation and hence their contraventions
attract a higher penalty.
[Subsections 46(2) and 47(3) of the
Financial Accountability Regime Bill 2023]
1.182
If the entity fails to provide information or access to materials
when required to do so by the investigator, it commits an offence
on the first day and a continuing offence for each subsequent day
of non-compliance.
[Subsection 46(3) of the Financial
Accountability Regime Bill 2023]
1.183
It also an offence to alter, destroy or conceal materials known to
be relevant to an investigation, with a maximum penalty of
two years’ imprisonment.
[Section 48 of the Financial Accountability
Regime Bill 2023]
1.184 The penalties and offences for non-compliance with an investigation are consistent with equivalents in the Banking Executive Accountability Regime, on which they were modelled. For more information on penalties and offences, see the dedicated sections below.
1.185
The Regulator’s power to appoint an investigator, and the
requirements to assist the investigator, do not affect the
operation of other provisions in the Financial Accountability
Regime.
[Subsection 46(4) of the Financial
Accountability Regime Bill 2023]
Examinations
1.186
To assist an investigation, the investigator may give notice in
writing requiring a person to appear for an examination. This power
ensures an investigator can undertake in person procedures as well
as operating remotely, and can consider matters within the
examinee’s knowledge which are not written down or capable of
production under the investigatory powers.
[Section 49 of the Financial
Accountability Regime Bill 2023]
1.187
The investigator must provide 14 days’ prior notice of an
examination. The person attending the examination may be required
to answer questions from the investigator under oath or
affirmation. The examination may be recorded and conducted in the
presence of persons such as lawyers, and an officer of both APRA
and ASIC (irrespective of which regulator appointed the
investigator). To reinforce privacy and accountability
considerations, it is an offence to be present at an investigation
without authorisation, subject to a maximum penalty of
30 penalty units.
[Sections 49 to 51 of the Financial
Accountability Regime Bill 2023]
1.188
A written record may be produced from the statements made by the
person at the examination. The person must be given a copy of the
written record, but it may be subject to any conditions imposed by
the investigator. It is an offence to fail to comply with these
conditions, subject to a maximum penalty of 6 months’
imprisonment.
[Section 52 of the Financial
Accountability Regime Bill 2023]
1.189
It is also an offence not to comply with any other requirement
relating to examinations, subject to a maximum penalty of
30 penalty units.
[Section 53 of the Financial Accountability
Regime Bill 2023]
1.190 The penalties relating to examinations are consistent with penalties in the Banking Executive Accountability Regime (for more see the below section on penalties).
Evidentiary use of certain material
1.191
Any of the statements made by a person at an examination may be
used as evidence against the person in a proceeding or in other
proceedings, subject to certain rules and exceptions. These
provisions are based on Part VIII of the Banking Act
1959 .
[Sections 54 to 61 of the Financial
Accountability Regime Bill 2023]
Auditors and actuaries under the Financial Accountability Regime
1.192 To support enforcement of the Financial Accountability Regime, obligations imposed on auditors and actuaries of certain entities under the Banking Act 1959 and other industry Acts administered by APRA will be extended to cover the Financial Accountability Regime (once the regime starts to apply).
1.193 Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 requires auditors and actuaries to assist APRA with investigations into breaches of the Financial Accountability Regime. Specifically, this Schedule requires:
·
an auditor of an ADI, an authorised non-operating holding company
or a subsidiary to provide information that will assist APRA in
performing its functions under the Financial Accountability
Regime;
[Schedule 1, items 25 to 27 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 16B, 16BA and 16C of the Banking Act
1959]
·
an auditor or actuary of a general insurer, an authorised
non-operating holding company or a subsidiary to provide
information to APRA that will assist APRA in performing its duties
under the Financial Accountability Regime;
[Schedule 1, items 42 to 44 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023, sections 49 to 49B of the Insurance Act 1973]
·
an auditor or actuary of a life company, a registered non-operating
holding company or a subsidiary to provide information that will
assist APRA in performing its functions under the Financial
Accountability Regime;
[Schedule 1, items 53 to 57 and 59 to
63 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; sections 88 to 89 and 98 to 99 of the Life
Insurance Act 1995]
·
an actuary of a private health insurer to provide information that
would assist APRA performing its functions under the Financial
Accountability Regime; and
[Schedule 1, items 78 to 81 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 110 to 113 of the Private Health Insurance
(Prudential Supervision) Act 2015]
·
an auditor or actuary of a superannuation entity to provide
information when there is likely to have been a breach of the
Financial Accountability Regime, by amending the definition of
regulatory provision .
[Schedule 1, items 86, 88 and 89 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 38A, 129 and 130A of the Superannuation Industry
(Supervision) Act 1993]
1.194 Consequences for failing to comply with these or other obligations of the Financial Accountability Regime include termination of the auditor or actuary’s appointment. Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 requires:
·
an ADI to remove an auditor from their appointment for failing to
properly perform functions and duties under the Financial
Accountability Regime;
[Schedule 1, item 28 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 17(2)(a) of the Banking Act 1959]
·
a general insurer to end an auditor or
actuary’s appointment if the general insurer is satisfied
that the auditor or actuary has failed to provide APRA with
relevant information in relation to breaches of the Financial
Accountability Regime;
[Schedule 1, item 38 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
43 of the Insurance Act 1973]
·
a life company to end the appointment of an auditor or actuary if
the life company is satisfied that the auditor or actuary has
failed to provide APRA with relevant information in relation to
breaches of the Financial Accountability Regime; and
[Schedule 1, items 52 and 58 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 85 and 94 of the Life Insurance Act 1995]
·
a private health insurer to terminate an actuary’s
appointment if the private health insurer reasonably believes that
the actuary has failed to provide APRA with relevant information in
relation to breaches of the Financial Accountability Regime.
[Schedule 1, items 76 and 77 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 107 of the Private Health Insurance (Prudential
Supervision) Act 2015]
1.195 The Financial Accountability Regime also provides APRA additional powers to direct auditors and actuaries in relation to breaches of the regime. Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 allows APRA to:
·
refer an auditor or actuary to a professional association, or apply
to a court to disqualify an auditor or actuary if APRA considers
that the auditor or actuary has failed to perform their duties
under the Financial Accountability Regime;
[Schedule
1, items 39 to 41 of the Financial Accountability Regime
(Consequential Amendments) Bill 2023; sections 44 and 48 of the
Insurance Act 1973]
·
direct a life company to remove an auditor or actuary if they have
failed to perform their duties under the Financial Accountability
Regime; and
[Schedule 1, item 64 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023;
section 125A of the Life Insurance Act 1995]
·
direct the removal of an auditor or actuary for a superannuation
entity, or direct a matter to an auditor or actuary’s
professional organisation for breaches of the regime.
[Schedule 1, items 91 and 92 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 131AA and 131A of the Superannuation Industry
(Supervision) Act 1993]
Enforcement and penalties
1.196 The Financial Accountability Regime has a variety of mechanisms for enforcement, once a contravention or likely contravention has been established. These mechanisms align with those in existing financial services law, and in particular are drawn from the Banking Executive Accountability Regime to ensure continuity and consistency of approach.
1.197 Enforcement mechanisms under the Financial Accountability Regime include:
· directions powers;
· disqualification;
· enforceable undertakings;
· injunctions;
· civil penalties; and
· some limited criminal offences.
1.198 Consistent with standard practice, the enforcement mechanism used will reflect the circumstances of the case. Contravention of the core obligations of the Financial Accountability Regime could trigger many enforcement mechanisms and civil penalties (i.e. disqualification of an accountable person, or directions to an accountable entity to comply with the regime or reallocate responsibilities of an accountable person). Non-compliance with an investigation or request for information from the Regulator could constitute an offence. The Regulator may also seek court orders for compliance or an injunction, or enter an enforceable undertaking with the relevant entity.
Directions
Compliance directions
1.200 The Regulator can give an accountable entity a direction if the Regulator believes the accountable entity, an accountable person of the entity, or of one of its significant related entities:
· contravened obligations under the Financial Accountability Regime; or
·
is likely to contravene obligations under the Financial
Accountability Regime, and the direction is necessary to prevent
that non-compliance.
[Section 64(1) of the Financial
Accountability Regime Bill 2023]
1.201 The directions can include directions to cause the accountable entity or any of its significant related entities to:
· take a specific action;
· undertake an audit;
· make changes to internal systems and practices;
· reconstruct, amalgamate or otherwise alter part of the entity’s structure or that of its relevant group; and
·
not take a specific action.
[Subsection 64(2) of the Financial
Accountability Regime Bill 2023]
1.202 The direction must:
· be given to the accountable entity in writing;
· identify the grounds on which it is given (i.e. the breach or likely breach which forms the basis of the order);
· specify a period for compliance; and
·
state that the accountable entity could commit an offence if it
fails to comply with the direction.
[Subsection 64(3) of the Financial
Accountability Regime Bill 2023]
1.203
An accountable entity or significant related entity may comply with
a direction despite anything in the entity’s constitution or
any contract to which the entity is a party. A direction does not,
except in limited cases, affect the obligations of parties under
such contracts. The Federal Court may make an order on how such
contracts operate.
[Subsections 64(5) to (7) and section
77 of the Financial Accountability Regime Bill 2023]
1.204
Notice of a decision to give, vary, or revoke a direction must be
provided to the accountable entity and to any relevant accountable
person and significant related entity. Decisions by the Regulator
to give, vary, or revoke directions, or to refuse to do so, are
subject to reconsideration by the Regulator, and to review by the
Administrative Appeals Tribunal.
[Subsection 64(4) and sections 91 to 95 of
the Financial Accountability Regime Bill 2023]
1.205
Non-compliance with a direction may attract a civil penalty and may
also be an offence. The maximum penalty for an accountable entity
or an officer of an accountable entity which commits an offence by
not complying with a direction is 50 penalty units (see more on
penalty and offence provisions below).
[Sections
66 and 80 of the Financial Accountability Regime Bill
2023]
Directions to reallocate responsibilities
1.206
The Regulator can direct an accountable entity to reallocate the
responsibilities of an accountable person of the entity or of its
relevant group (including of a significant related entity).
[Section 65 of the Financial Accountability Regime
Bill 2023]
1.207 The power is designed to be used in exceptional circumstances to direct an accountable entity to reallocate the responsibilities of accountable persons of its relevant group in order to minimise prudential risk or risks of serious non-compliance. A similar power exists under the Banking Executive Accountability Regime, with the power in the Financial Accountability Regime expanded to cover serious non-compliance risks .
1.208 In order to make a reallocation direction the Regulator must be satisfied that the current allocation of responsibilities has given or is likely to give rise to:
· a prudential risk; or
·
a risk of significant and systemic non-compliance with financial
laws.
[Subsection 65(1) of the Financial Accountability Regime Bill
2023]
1.209
The Regulator must have regard to the responsibilities set out in
the accountability statement, where a statement for the accountable
person has been given.
[Subsection 65(2) of the
Financial Accountability Regime Bill 2023]
1.210
A direction to reallocate responsibilities must be given in
writing, specify a period by which the direction must be complied
with, and state that the accountable entity could commit an offence
or be liable to a civil penalty if it fails to comply with the
direction.
[Subsection 65(3) of the Financial Accountability
Regime Bill 2023]
1.211
Notice of a decision to give, vary or revoke a direction must be
provided to the accountable entity, the person whose responsibility
is to be reallocated, the person to whom the responsibility is
reallocated, and - if applicable - to the significant
related entity of the accountable persons.
[Subsection 65(4) of the Financial
Accountability Regime Bill 2023]
1.212
Decisions by the Regulator to give, vary, or revoke directions
- or to refuse to do so - are subject to
reconsideration by the Regulator, and to review by the
Administrative Appeals Tribunal. The direction is not a legislative
instrument.
[Sections 65 and 91 to 95 to the
Financial Accountability Regime Bill 2023]
Other provisions relating to directions
1.213
Information about directions may be provided by the Regulator to
the Minister, on the Regulator’s own initiative or on request
by the Minister.
[Section 78 of the Financial
Accountability Regime Bill 2023]
1.214
If a direction relating to non-compliance or a direction to
relocate responsibilities is inconsistent with rules made by the
Minister or the Regulator rules, the direction prevails over the
rules, to the extent of the inconsistency.
[Section 79 of the Financial Accountability
Regime Bill 2023]
Offences for failing to comply with directions
1.215
An accountable entity commits an offence if it does not comply with
a direction from the Regulator. The maximum penalty is
50 penalty units. Failure to comply with a direction to
reallocate responsibilities may also contravene civil penalty
provisions of the Financial Accountability Regime Bill 2023.
[Subsections 66(1) and (2) and
section 80 of the Financial Accountability Regime Bill
2023]
1.216
A director, senior executive, or other senior employee of an
accountable entity commits an offence if they fail to take
reasonable steps to ensure that the accountable entity complies
with a direction from the Regulator. The maximum penalty is 50
penalty units. The offence applies more broadly than just
accountable persons because of the importance of ensuring
compliance with the Regulator’s directions to the
administration and enforcement of the Financial Accountability
Regime.
[Subsections 66(3) and (4) of
the Financial Accountability Regime Bill 2023]
1.217
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 amends the Financial Regulator Assessment
Authority Act 2021 to allow individuals working for the
Financial Regulator Assessment Authority to disclose the fact that
directions have been given under the Financial Accountability
Regime.
[Schedule 1, items 32 and 33 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 40 of the Financial Regulator Assessment Authority
Act 2021]
1.218
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 amends the Payment Systems and Netting Act
1998 to ensure the directions given under the Financial
Accountability Regime operate consistently with the legal framework
governing payment systems in Australia.
[Schedule 1, items 71 to 73 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 5 of the Payment Systems and Netting Act
1998]
Secrecy provisions relating to directions under the Financial Accountability Regime
1.219
The Regulator may determine that secrecy arrangements apply to a
direction given under the Financial Accountability Regime. This can
be done if the Regulator considers it is necessary to protect
certain customers of accountable entities, or to promote financial
system stability in Australia.
[Section 67 of the Financial
Accountability Regime Bill 2023]
1.220
Where secrecy arrangements apply to a direction, a directed
accountable entity or another person (such as an employee or
contractor of the entity) commits an offence for disclosing
information revealing the fact that the direction was given, except
in limited circumstances. The maximum penalty for contravening the
secrecy arrangements is two years imprisonment.
[Section 68 of the Financial
Accountability Regime Bill 2023]
1.221 The secrecy arrangements do not apply where the information:
· has already been lawfully made available to the public;
· is disclosed to a legal representative to seek legal advice;
· is disclosed in a manner that is authorised under law or by a legislative instrument made under the Financial Accountability Regime; or
·
is disclosed to another person who is subject to the secrecy
arrangements for the purposes of one of the other exemptions.
[Sections 69 to 76 of the Financial
Accountability Regime Bill 2023]
Disqualification of accountable persons
1.222 The Regulator can disqualify a person from being an accountable person for a period if the Regulator is satisfied that the accountable person has breached their accountability obligations under the Financial Accountability Regime.
1.223 The power to disqualify an accountable person is required as accountable persons have significant power in accountable entities (which themselves are central to the Australian financial system) and should exercise due skill, care and diligence in relation to their roles. In some cases, the appropriate remedy for contravention of the Financial Accountability Regime will be that the current or former accountable person will not be able to hold such a role in future.
1.224
The Regulator can disqualify a person if they have breached their
accountability obligations and their disqualification is justified,
having regard to the seriousness of the breach.
[Section 42 of the Financial Accountability
Regime Bill 2023]
1.225
A person can be disqualified from being an accountable person from
an accountable entity, a significant related entity, or a class of
such entities. The Regulator must give written notice to the
accountable person and the accountable entity, and if relevant to
the significant related entity, to give them an opportunity to make
submissions. The disqualification takes effect from the date
specified in the notice.
[Subsection 42(2) to (7) of the
Financial Accountability Regime Bill 2023]
1.226
The Regulator may vary or revoke a disqualification if the
Regulator considers it appropriate, or on application of the
disqualified person. To do so, the Regulator must give written
notice of the variation or revocation to the affected accountable
person and to relevant accountable entities or significant related
entities. The variation or revocation takes effect from the day the
determination was made.
[Section 43 of the Financial
Accountability Regime Bill 2023]
1.227
A written notice making, varying or revoking disqualification is
not a legislative instrument .
[Subsections 42(8) and 43(4) of the
Financial Accountability Regime Bill 2023]
1.228
An accountable entity breaches its key personnel obligations if it
appoints an accountable person who has been disqualified.
[Paragraph 23(1)(b) of the Financial
Accountability Regime Bill 2023]
1.230
Decisions by the Regulator to disqualify a person, to vary or
revoke a disqualification, or to refuse to vary or revoke a
disqualification, are subject to reconsideration by the Regulator,
and to review by the Administrative Appeals Tribunal.
[Section 91 of the Financial
Accountability Regime Bill 2023]
Enforceable undertakings
1.231 The Regulator can accept enforceable undertakings in relation to the Financial Accountability Regime, including from any accountable entity. Undertakings may relate to any matter in relation to which the Regulator has a power or function under the regime. For example, an undertaking may relate to compliance with the regime by an accountable entity or by an accountable person.
1.232 The Regulator can enforce enforceable undertakings in the Federal Court.
1.233
Enforceable undertakings will be accepted and enforced under
Part 6 of the Regulatory Powers (Standard Provisions) Act
2014 , with modifications set out in the Financial
Accountability Regime Bill 2023 to ensure all relevant kinds of
undertakings can be accepted.
[Section 84 of the Financial
Accountability Regime Bill 2023]
Injunctions
1.234 The Regulator may apply for an injunction in the Federal Court to uphold the requirements of the Financial Accountability Regime. The Court may grant an injunction requiring or restraining conduct, for instance to restrain a person from engaging in conduct that contravenes a direction given by the Regulator. The Court may also grant an injunction by consent of all parties to the relevant proceedings.
1.235
Injunctions will be enforced under Part 7 of the Regulatory
Powers (Standard Provisions) Act 2014 , with modifications set
out in the Financial Accountability Regime Bill 2023 to ensure it
works under the regime.
[Section 85 of the Financial
Accountability Regime Bill 2023]
Civil penalties for contravention of the Financial Accountability Regime
1.237 A civil penalty may be incurred for each contravention. To determine the amount of each penalty, the Financial Accountability Regime provides a flexible method modelled on that used in corporations and consumer legislation.
1.238
An accountable entity that contravenes its obligations under the
Financial Accountability Regime may be subject to a civil
penalty.
[Section 80 of the Financial
Accountability Regime Bill 2023]
1.239
The maximum penalty for a body corporate, including an accountable
entity, is calculated using a formula where the maximum penalty is
at least 50,000 penalty units. The maximum penalty may be greater
depending on the benefit derived or detriment avoided by the
entity, and the entity’s annual turnover.
[Subsections 83(1) and (2) of the
Financial Accountability Regime Bill 2023]
1.240
The maximum penalty for a person other than a body corporate,
including an accountable person, is calculated using a formula
where the maximum penalty is at least 5,000 penalty units. The
maximum penalty may be greater depending on the benefit derived or
detriment avoided by the person.
[Subsections 83(1) and (3) of the
Financial Accountability Regime Bill 2023]
1.241
A person can face a civil penalty if they assist another person to
contravene a civil penalty provision under the Financial
Accountability Regime. An example of such an ancillary
contravention is an accountable person aiding an accountable entity
to contravene its accountability obligations.
[Section 81 of the Financial
Accountability Regime Bill 2023]
1.242 The civil penalties in the Financial Accountability Regime are consistent with some of the existing relevant legislative regimes, including the Corporations Act , the Insurance Contracts Act 1984, the Australian Securities and Investments Commission Act 2001 , and the Credit Act , and are comparable to those in the Banking Executive Accountability Regime.
1.243
The Regulator has the power to commence civil penalty proceedings
in the Federal Court. Civil penalty provisions will be enforced
under Part 4 of the Regulatory Powers (Standard Provisions)
Act 2014 , with modifications to provide for the maximum
penalties set out above, and to ensure that additional matters
relevant to the Financial Accountability Regime are taken into
account by a court in determining the appropriate penalty.
[Sections 82 and 83 of the Financial
Accountability Regime Bill 2023]
Offences
1.244 The Financial Accountability Regime also provides for offences relating to non-compliance with an investigation, request for information, or directions made by the Regulator, the appointment of disqualified accountable persons, and legal professional privilege.
1.245
Most of the offence provisions in the Financial Accountability
Regime Bill 2023 replicate existing offences in the Banking Act
1959 that apply in relation to the Banking Executive
Accountability Regime. It is appropriate to maintain the treatment
of this conduct as a criminal offence to provide continuity between
the regimes, and due to the serious nature of the wrongdoing
involved (see Chapter 2 of the Guide to Framing Commonwealth
Offences). The strong deterrent effect of a criminal sanction is
necessary for the Financial Accountability Regime because of the
central role that directors and senior executives of entities
operating in the Australian financial system play in the Australian
economy.
[Sections 44 to 53, 63, 66 and 68 of the
Financial Accountability Regime Bill 2023]
1.246
This rationale also applies to offences for failure to comply with
a condition of a notice which relates to disclosure of information.
These offences and their maximum penalties accord with the
treatment of failing to comply with a condition of a notice issued
by a Regulator under the Banking Act 1959 . For consistency,
these offence penalties also align with penalties for disclosure of
information about a direction that is covered by a secrecy
determination of the Regulator.
[Section 68 and subsections 92(2) and
94(5) of the Financial Accountability Regime Bill 2023]
1.247
For clarity, the Financial Accountability Regime Bill 2023 applies
Chapter 2 of the Criminal Code such that the physical
elements of the offence are set out in the conduct provision.
[Section 86 of the Financial
Accountability Regime Bill 2023]
1.248
Any contravention of an offence provision or a civil penalty
provision includes a reference to a contravention of the conduct
provision.
[Section 87 of the Financial
Accountability Regime Bill 2023].
1.249
Five offences include a custodial sentence as the maximum penalty.
These penalties are justified either because of the serious nature
of the offence, involving dishonesty or an attempt to compromise
regulation of the Financial Accountability Regime, or because of
the serious consequences that committing the offence may have on
the economy where the offence involves secrecy relating to
directions.
[Sections 48, 52, 68, 92 and 94 of
the Financial Accountability Regime Bill 2023]
1.250
Pecuniary penalties relating to offences in the Financial
Accountability Regime Bill 2023 are generally not large, and are
suitably proportioned when applied to corporations and individual
persons consistent with the Guide to Framing Commonwealth Offences.
A court has its usual discretion to order a penalty up to the
maximum amount prescribed by the legislation to suit the
circumstances of the case.
[Sections 44 to 53, 63, 66 and 68 of
the Financial Accountability Regime Bill 2023]
Court orders for compliance
1.252
If the Regulator certifies that a person has failed to comply with
a requirement of the Financial Accountability Regime, the Federal
Court may order that person to comply.
[Section 90 of the Financial
Accountability Regime Bill 2023]
Impact of non-compliance with obligations under the Financial Accountability Regime in relation to other laws
Disqualification under other regimes
1.253 Non-compliance with the Financial Accountability Regime may result in consequences under other regimes.
1.254 Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 makes amendments which disqualify a person from:
·
being a director, senior manager or auditor of an ADI or an
authorised non-operating holding company if they have been
convicted of an offence under the Financial Accountability Regime;
[Schedule 1, item 29 of the Financial Accountability
Regime (Consequential Amendments) Bill 2023; section 20 of the
Banking Act 1959]
·
being a director or senior manager of a general insurer, an
authorised non-operating holding company or a corporate agent
if the person has committed an offence under the Financial
Accountability Regime;
[Schedule 1, item 37 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
25 of the Insurance Act 1973]
·
being a director, principal executive officer or otherwise act for
a life company if the person has committed an offence under the
Financial Accountability Regime; and
[Schedule
1, item 67 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; section 245 of the Life Insurance Act
1995]
·
acting as an officer or an appointed actuary of a private health
insurer if the person has committed an offence under the Financial
Accountability Regime; and
[Schedule 1, items 82 and 83 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 119 and 120 of the Private Health Insurance
(Prudential Supervision) Act 2015]
·
being a trustee, actuary or auditor of a superannuation entity if
the person has contravened obligations under the Financial
Accountability Regime.
[Schedule 1, items 87 and 90 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 126H and 130D of the Superannuation Industry
(Supervision) Act 1993]
1.255 A breach of an obligation under the Financial Accountability Regime can also inform decisions of the Regulator under other laws. This includes where the Regulator decides to revoke or refuse to grant a licence, or in relation to winding up companies.
1.256 For instance, Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 makes necessary amendments to other Acts so that a breach of the Financial Accountability Regime can be used by APRA as the basis to:
·
revoke the authorisation of an ADI or its authorised non-operating
holding company;
[Schedule 1, items 21 and 22 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 9A and 11AB of the Banking Act 1959]
·
revoke a general insurer’s authorisation or the authorisation
of a non-operating holding company of a general insurer;
[Schedule 1, items 35 and 36 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 15 and 21 of the Insurance Act 1973]
·
refuse to register a life company, or vary or revoke a life
company’s registration or the registration of a life
company’s non-operating holding company; and
[Schedule 1, items 49 to 51 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 21, 26 and 28C of the Life Insurance Act
1995]
·
cancel a private health insurer’s registration.
[Schedule 1, items 74 and 84 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 21 and 168 of the Private Health Insurance
(Prudential Supervision) Act 2015]
1.257 A breach of the Financial Accountability Regime can also be considered by APRA when:
·
granting and imposing conditions on RSE licenses, by including the
Financial Accountability Regime in the definition of RSE licensee
law; and
[Schedule 1, item 85 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
10 of the Superannuation Industry (Supervision)
Act 1993]
·
a general insurer is being put under judicial management for
failing to comply with certain laws.
[Schedule 1, items 45 to 47 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 62M, 62W and 62ZOY of the Insurance
Act 1973]
1.258
The amendments to provisions which allow for the revocations of
licences of insurers and superannuation entities apply regardless
of whether the relevant breaches occur prior to the commencement of
the Financial Accountability Regime (Consequential Amendments) Bill
2023.
[Schedule 2, items 24 and 26 to 28 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023]
Entities in financial distress
1.259 The Financial Accountability Regime (Consequential Amendments) Bill 2023 also makes amendments to other Acts to ensure the Financial Accountability Regime interacts appropriately with legislative schemes that govern entities in financial distress.
1.260 Specifically, Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023:
·
ensures proceedings against a body corporate for an offence against
the Financial Accountability Regime will not prevent the
winding-up of the body corporate and that the regime will
still apply while a statutory manager has been appointed under the
Banking Act 1959 ;
[Schedule 1, items 23, 24 and 30 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 15D and 69BA of the Banking Act 1959]
·
ensures proceedings against a body corporate for an offence against
the Financial Accountability Regime will not prevent statutory or
judicial management and that the regime will still apply while a
statutory or judicial manager has been appointed under the Life
Insurance Act 1975 ;
[Schedule 1, items 65, 66 and 68 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; sections 166, 179AY and 248 of the Life Insurance Act
1995]
·
ensures that the institution of proceedings against a body
corporate under the Financial Accountability Regime does not
prevent judicial management or winding-up under the Insurance
Act 1973 ;
[Schedule 1, item 48 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
129AA of the Insurance Act 1973]
·
ensures the appointment of an external or terminating manager of a
health benefits fund, does not affect the operation of the
Financial Accountability Regime; and
[Schedule 1, item 75 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
84 of the Private Health Insurance (Prudential Supervision) Act
2015]
·
expands the ability of a court to stop the payment of money to
protect certain creditors for certain breaches of legislation to
include breaches of the Financial Accountability Regime;
[Schedule 1, item 93 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
313 of the Superannuation Industry (Supervision) Act
1993]
1.261
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 amends the Financial Sector (Transfer and
Restructure) Act 1999 to allow businesses undertaking a
restructure because of an order under the Financial Accountability
Regime to take advantage of the regulatory relief under that Act.
[Schedule 1, item 34 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 36B of the Financial Sector (Transfer and
Restructure) Act 1999]
Miscellaneous provisions
Indemnification and insurance for accountable entities
1.262
A significant related entity must not indemnify an accountable
entity against the consequences of breaching the Financial
Accountability Regime, or pay insurance premiums insuring the
entity against those consequences. This prohibition also applies to
a body corporate in the same corporate group as the accountable
entity.
[Subsections 97(1) and (4) of the Financial
Accountability Regime Bill 2023]
1.263
Any arrangement that purports to indemnify or insure an accountable
entity against liability, or to exempt them from liability,
contrary to that prohibition is void.
[Subsection 97(3) of the Financial Accountability
Regime Bill 2023]
1.264
This prohibition does not apply to legal costs.
[Subsection 97(2) of the Financial Accountability
Regime Bill 2023]
1.265 There is no prohibition under the Financial Accountability Regime relating to indemnification of, or payment of insurance premiums relating to, accountable persons.
Privilege against self-incrimination and legal professional privilege
1.266
A person cannot refuse to give information or to provide documents
on the basis of the privileges against self-incrimination or
exposure to a penalty. However, if an individual makes a valid
claim to privilege before producing the information, that
information is not admissible as evidence against the individual in
criminal proceedings, other than proceedings in respect of the
falsity of the information.
[Section 88 of the Financial
Accountability Regime Bill 2023]
1.267
A lawyer can refuse to comply with the requirement to provide
information or to produce a document if doing so would breach legal
professional privilege. However, this exception does not apply if
the person to whom the information relates consents to the lawyer
releasing the information. If the lawyer refuses to comply, the
lawyer must instead disclose the name of the person to whom (or on
whose behalf) the privileged communication was made. If a lawyer
fails to comply with these requirements, the lawyer commits an
offence subject to a maximum penalty of 30 penalty
units.
[Section 89 of the Financial
Accountability Regime Bill 2023]
1.268 These provisions are necessary for the efficient regulation of the Financial Accountability Regime, ensuring that access to information relevant to an investigation is not denied. The approach taken balances the public interest in accountability among vital financial services with protection of individual privileges. To strike the right balance, the abrogation of the privilege against self-incrimination is limited, such that information produced after making a valid claim is not admissible in evidence against the individual in criminal proceedings, and the sharing of such information is limited by the information sharing provisions in the regime and each Regulator’s information protection regimes.
1.269
Protections for whistle-blowers under Part 9.4AAA of the
Corporations Act will be available in relation to the
Financial Accountability Regime.
[Schedule
1, item 31 of the Financial Accountability Regime (Consequential
Amendments) Bill 2023; Section 1317AA of the Corporations
Act]
Liability provisions
Conduct of directors, employees and agents
1.270
It may be necessary to establish the state of mind of an individual
in proceedings for offences under the Financial Accountability
Regime Bill 2023. In these circumstances, it is sufficient to show
that an employee or agent of the individual engaged in the relevant
conduct and had the relevant state of mind. State of mind includes
knowledge, intention, opinion, belief or purpose.
[Section 100 of the Financial
Accountability Regime Bill 2023]
1.271
The relevant conduct is limited to conduct by an individual’s
employee or agent within the scope of actual or apparent authority,
and will not be attributed to the individual where that individual
can establish that they exercised due diligence to avoid the
conduct.
[Section 100 of the Financial
Accountability Regime Bill 2023]
1.272
An individual will not be imprisoned if they are convicted of an
offence as a result of conduct or a state of mind being attributed
to them under section 100(1)-(2) of the Financial Accountability
Regime Bill 2023.
[Subsection 100(3) of the Financial
Accountability Regime Bill 2023]
Protection from liability
1.273
Actions and omissions for the purpose of complying with a direction
or a secrecy requirement of the Financial Accountability Regime do
not attract liability if it was reasonable for the person to have
acted or omitted to act. This protection applies to a person who is
an employee, agent, officer or senior manager of an accountable
entity, or a member of an accountable entity’s group, or
accountable entity or member of an accountable entity’s
group. This protection is necessary to, for example, allow an
accountable entity and its senior management (or other relevant
persons) to promptly and fully comply with a direction given by the
Regulator to address prudential risks or non-compliance with
obligations. This protection complements protections already
available for officers and staff of the Regulators, for instance
those involved in issuing the direction and monitoring its
implementation.
[Section 102 of the Financial
Accountability Regime Bill 2023]
1.274
Persons performing functions or duties, or exercising powers, under
the Financial Accountability Regime Bill 2023 are also protected
from liability if the function or duty is performed, or power
exercised in good faith and without negligence. Protection from
liability will enable persons who are required to perform functions
or exercise powers to do so without being obstructed by the
possibility of a continuous stream of repeated challenges to the
performance of those functions or duties, or the exercise of those
powers when done in good faith and without negligence.
[Section 101 of the Financial
Accountability Regime Bill 2023; Schedule 1, item 12 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 58 of the Australian Prudential Regulation Authority
Act 1998]
1.275 These protections from civil and criminal liability are necessary to support compliance with the regime and minimise prudential risk. They also support compliance with the Financial Accountability Regime by concentrating enforcement on intentional and malicious contraventions, rather than inadvertent breaches which may arise during a genuine attempt to comply with the regime.
1.276
The prescribed protections from liability in the Financial
Accountability Regime are intended to work alongside each other and
not to limit the operation of each other, or that of section 58 of
the Australian Prudential Regulation Authority Act 1998
or section 246 of the Australian Securities and Investments
Commission Act 2001 .
[Section 103 of the Financial
Accountability Regime Bill 2023]
Merits review of decisions made by the Regulator
1.277
Certain decisions of the Regulator are subject to merits review.
Reviewable decisions, and the persons affected by each type of
decision, are listed in the table in section 91 of the Financial
Accountability Regime Bill 2023. Such decisions are described
throughout this explanatory memorandum where the substantive
provisions are explained.
[Section 91 of the Financial
Accountability Regime Bill 2023]
1.278
Where a decision is reviewable, the Regulator must give all persons
affected by the decision the reasons for the decision and
information about the person’s review rights.
[Subsection 92(1) of the Financial
Accountability Regime Bill 2023]
1.279
To seek review, a person affected by a reviewable decision may
first apply for the Regulator that made the original decision to
reconsider the decision. The Regulator must reconsider the decision
within 60 days and notify the applicant of the outcome by written
notice. If the Regulator does not notify the applicant in that
time, the decision is taken to be affirmed.
[Sections 93 and 94 of the Financial
Accountability Regime Bill 2023]
1.280 A notice to an affected person of a reviewable decision, or of a reconsideration decision, may contain conditions relating to disclosure of information about the reasons for the decision. For example, the Regulator may include a non-disclosure condition in a notice relating to a decision about a direction.
1.281
It is an offence to not comply with a condition in a notice that
relates to disclosure. The maximum penalty for not complying with a
notice condition is two years imprisonment, aligning with the
penalty for disclosure of information about a direction that is
subject to secrecy arrangements in section 68 of the Financial
Accountability Regime Bill 2023, and accords with the treatment of
failing to comply with a condition of a notice issued by APRA in
the Banking Act 1959 .
[Subsections 92(2) and 94(5) of the Financial
Accountability Regime Bill 2023]
1.282
However, a person may disclose information for the purpose of
seeking administrative review of, or obtaining legal advice about,
a direction covered by a secrecy provision without committing an
offence.
[Sections 96 of the Financial
Accountability Regime Bill 2023]
1.283
Following internal reconsideration of the decision, a person
affected by the decision may seek review of the reconsidered
decision by the Administrative Appeals Tribunal. A review by the
Tribunal is conducted in accordance with the Administrative
Appeals Tribunal Act 1975 .
[Section 95 of the Financial
Accountability Regime Bill 2023]
1.285 Decisions which are legislation-like in character, and decisions which are procedural or preliminary as they precede a substantive decision, are not suitable for administrative review.
1.286
Likewise, other decisions are not reviewable where the benefits of
not providing administrative review outweigh the objectives of
providing it. This applies to decisions of the Regulator and the
Minister that are made in favour of the affected person by reducing
the scope of their responsibilities or by providing flexibility or
an exemption from compliance with the Financial Accountability
Regime. In addition, challenges to the Minister’s decision
not to exempt an accountable entity may undermine public and
industry confidence in the prudential and financial system and
create financial uncertainty. Where the Minister exempts an
accountable entity from the regime, the exemption must include a
statement setting out the reasons for this exemption. In relation
to other decisions, the Minister must provide reasons on request,
as required by section 13 of the Administrative Decisions
(Judicial Review) Act 1977 .
[Subsections 11(2) and 16(1) to (3) of the
Financial Accountability Regime Bill 2023]
Rule-making powers
1.288
The Regulator may also make rules, known as the Regulator
rules , prescribing matters that are required, permitted,
necessary or convenient to prescribe by such rules under the
Financial Accountability Regime Bill 2023.
[Section 105 of the Financial Accountability
Regime Bill 2023]
1.289
The Minister rules and the Regulator rules may not create an
offence or civil penalty, provide certain enforcement powers,
impose a tax, or directly amend the primary law. The rules are
legislative instruments and will therefore be subject to
disallowance and appropriate Parliamentary scrutiny.
[Subsections 104(2) and 105(2) of the
Financial Accountability Regime Bill 2023]
Application of the Financial Accountability Regime
1.290
The Financial Accountability Regime applies within Australia and
its external territories, capturing conduct (including that of the
Crown) that occurs or has an impact within Australia’s
jurisdiction. This means the Regulator’s powers can be
applied to entities and persons within Australia in relation to
conduct which occurs within Australia, as well as conduct which
occurs offshore and has impacts within Australia.
[Sections 5 to 7 of the Financial
Accountability Regime Bill 2023]
1.291 For example, in relation to offshore conduct, the Regulator could register or disqualify an accountable person who is a foreign citizen based overseas. The Regulator could also take enforcement action towards an Australian accountable entity in relation to the conduct of its offshore accountable person or significant related entity, in order to establish and address a contravention of that accountable entity’s obligations or a risk to its prudential standing or prudential reputation - such as investigating the accountable entity and giving it a direction to comply with the Financial Accountability Regime or reallocate responsibilities of an accountable person.
1.292
The Regulator can administer and enforce the Financial
Accountability Regime within Australia. While the regime binds the
Crown, it does not render the Crown liable for an offence.
[Sections 5 to 7 of the Financial
Accountability Regime Bill 2023]
Other miscellaneous provisions
1.293
APRA and ASIC must include information about investigations
conducted under the Financial Accountability Regime in their
respective annual reports from the 2023-24 financial year
onwards. The information each regulator provides should deal with
its own investigations and joint investigations, but need not cover
investigations conducted solely by the other regulator.
[Schedule 1, item 13 and Schedule 2, item 32 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 59 of the Australian Prudential Regulations Authority
Act 1998; Schedule 1, items 18 and 20 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023;
sections 136, 340 and 341 of the Australian Securities and
Investments Commission Act 2001]
1.294
However, APRA and ASIC are not authorised to disclose information
about the affairs of a particular person as part of the information
included in their annual reports.
[Schedule 1, item 14 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
59 of the Australian Prudential Regulation Authority Act 1998;
Schedule 1, item 19 of the Financial Accountability Regime
(Consequential Amendments) Bill 2023; section 136 of the Australian
Securities and Investments Commission Act 2001]
1.295
The Financial Accountability Regime Bill 2023 does not have the
effect of creating a cause of action that would not have existed
without it being enacted.
[Section 98 of the Financial
Accountability Regime Bill 2023]
1.296
The Commonwealth is liable to pay compensation if the operation of
the Financial Accountability Regime results in an acquisition of
property otherwise than on just terms, including the transition
from the Banking Executive Accountability Regime.
[Section 99 of the Financial Accountability
Regime Bill 2023; Schedule 2, item 3 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.297
Schedule 2 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 creates a series of definitions to aid in the
transitional arrangements and clarifies it does not limit the
application of the Acts Interpretations Act 1901 .
[Schedule 2, items 1 and 2 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023]
1.298
Fees, charges or penalties paid to APRA under the Financial
Accountability Regime are not credited to APRA’s Special
Account.
[Schedule 1, item 4 of the Financial
Accountability Regime (Consequential Amendments) Bill 2023; section
53 of the Australian Prudential Regulation Authority Act
1998]
1.299
Simplified outlines of the key aspects of the Financial
Accountability Regime are provided throughout the Financial
Accountability Regime Bill 2023 to assist readers.
[Sections 4, 14 and 35 of the Financial
Accountability Regime Bill 2023]
Commencement, application, and transitional provisions
1.301
Part 1 of Schedule 1 and Schedule 2 to the Financial Accountability
Regime (Consequential Amendments) Bill 2023 commence at the same
time as the Financial Accountability Regime Bill 2023. Part 2 of
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 commences on the date the regime begins to
apply to the banking industry, six months after the commencement of
the Financial Accountability Regime Bill 2023.
[Section 2 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.302 Obligations under the Financial Accountability Regime will not apply to accountable entities immediately after that date of commencement. Instead, the Financial Accountability Regime (Consequential Amendments) Bill 2023 provides for a staggered application of the obligations under the Financial Accountability Regime to the different industries in the financial system.
1.303 The Financial Accountability Regime will first apply to the banking industry (ADIs and their authorised non-operating holding companies). Entities in the banking industry are currently subject to the obligations under the Banking Executive Accountability Regime. The Financial Accountability Regime (Consequential Amendments) Bill 2023 therefore provides for specific transitional arrangements so that these entities can be transitioned from the Banking Executive Accountability Regime to the Financial Accountability Regime.
1.304 The Financial Accountability Regime Bill 2023 provides for a deferred application of the Financial Accountability Regime to the insurance and superannuation industries so that they have sufficient time to adjust their systems and processes before they are subject to the obligations under the regime.
Transitional arrangements for the banking industry
1.305
The majority of the obligations under the Financial Accountability
Regime will apply to the banking industry six months after the
Financial Accountability Regime Bill 2023 commences.
[Subsection 9(2) of the Financial
Accountability Regime Bill 2023]
1.307
Accountability statements provided to APRA under the Banking
Executive Accountability Regime will automatically transition to
become accountability statements under the Financial Accountability
Regime.
[Schedule 2, item 13 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.308
APRA and ASIC may jointly make rules prescribing transitional
arrangements under the Financial Accountability Regime
(Consequential Amendments) Bill 2023.
[Schedule 2, item 34 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
Transitioning of accountable persons
1.309
Accountable persons of entities in the banking industry will
automatically have their registration transitioned from the Banking
Executive Accountability Regime to the Financial Accountability
Regime. This only applies where the person will continue to be an
accountable person under the Financial Accountability Regime. While
re-registration of accountable persons is not necessary, the
transition from the Banking Executive Accountability Regime to the
Financial Accountability Regime would most likely result in
material changes to the details of the responsibilities of those
accountable persons and the Regulator must be notified of any such
changes.
[Schedule 2, items 4 and 13 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023]
1.310
Any applications to register accountable persons under the Banking
Executive Accountability Regime that are pending at the time the
Financial Accountability Regime commences, will be considered to be
applications for registration under the Financial Accountability
Regime.
[Schedule 2, item 6 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.311
A person who became an accountable person under the Banking
Executive Accountability Regime on a temporary basis (i.e. due to
an unexpected vacancy or acting for a short period) will be taken
to be a new temporary accountable person when the Financial
Accountability Regime starts to apply to the banking
industry.
[Schedule 2, item 7 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.312
Entities can register new accountable persons in the 30 days prior
to the Financial Accountability Regime applying to the banking
industry.
[Schedule 2, item 8 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
Deferred remuneration
1.313
The Financial Accountability Regime deferred remuneration
obligations for the banking industry will apply when the decision
to provide remuneration occurs in first financial year that begins
six months after the Financial Accountability Regime applies to the
banking industry.
[Schedule 2, item 11 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.314
Remuneration that was decided to be provided to an accountable
person before the first financial year starting six months after
the Financial Accountability Regime applies to the banking industry
will still be subject to the deferred remuneration rules under the
Banking Executive Accountability Regime.
[Schedule 2, item 10 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.315
The deferred remuneration obligations under the Banking Executive
Accountability Regime will also continue to apply despite the
repeal of the Banking Executive Accountability Regime to
accountable persons who do not transition to Financial
Accountability Regime until the period for the deferral
finishes.
[Schedule 2, item 12 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
Continuing application of the Banking Executive Accountability Regime
1.316
The Banking Executive Accountability Regime will apply to the
banking industry before the application of the Financial
Accountability Regime.
[Schedule 2, item 18 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.317
The Banking Executive Accountability Regime will be repealed once
the Financial Accountability Regime starts applying to the Banking
industry.
[Schedule 1, Part 2 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.318 However, some obligations under the Banking Executive Accountability Regime will continue to apply to the banking industry after the application of the Financial Accountability Regime to enable the effective transition from the Banking Executive Accountability Regime.
1.319 This means that:
·
APRA must still be notified of relevant changes in an
accountability statement or an accountability map, or of a
notification event, under the Banking Executive Accountability
Regime;
[Schedule 2, item 14 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
directions to reallocate responsibilities given under the Banking
Executive Accountability Regime will continue to have force as
directions under the Financial Accountability Regime;
[Schedule 2, item 15 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
directions for non-compliance given under the Banking Executive
Accountability Regime will continue to have force, despite the
repeal of the Banking Executive Accountability Regime;
[Schedule 2, item 19 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
enforceable undertakings and injunctions under the Banking
Executive Accountability Regime will continue to have force,
despite the repeal of the Banking Executive Accountability Regime;
and
[Schedule 2, item 21 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
APRA will continue to be able to exercise its powers under the
Banking Executive Accountability Regime to investigate
non-compliance in the same manner and subject to the same
obligations as before the application of the Financial
Accountability Regime (including secrecy obligations).
[Schedule 2, item 29 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.320 The Financial Accountability Regime can be used to take action in relation to breaches of the Banking Executive Accountability Regime. Specifically, under the Financial Accountability Regime:
·
a non-compliance direction may be made in relation to breaches of
the Banking Executive Accountability Regime;
[Schedule 2, item 16 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
an accountable person may be disqualified in relation to breaches
under the Banking Executive Accountability Regime;
[Schedule 2, item 9 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
any accountable person disqualified under the Banking Executive
Accountability Regime will continue to be disqualified under the
Financial Accountability Regime on similar terms; and
[Schedule 2, item 5 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
·
the authority of an ADI may be revoked in relation to breaches of
the Banking Executive Accountability Regime, regardless of whether
the breach was before or after the application of the Financial
Accountability Regime to the ADIs.
[Schedule 2, item 17 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.321
Information collected under the Banking Executive Accountability
Regime can be used to investigate breaches under the Financial
Accountability Regime. This can occur regardless of whether the
relevant breach occurred before or after the commencement of the
Financial Accountability Regime. However, the restrictions on
sharing information between APRA and ASIC in relation to such
information brought in as part of the Financial Accountability
Regime will apply to that information.
[Schedule 2, items 29, 30, 31 and 33 of
the Financial Accountability Regime (Consequential Amendments) Bill
2023]
1.322
Decisions made under the Banking Executive Accountability Regime
can continue to be reviewed under the Banking Executive
Accountability Regime, according to the existing review
procedures.
[Schedule 2, item 20 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.323
Schedule 1 to the Financial Accountability Regime (Consequential
Amendments) Bill 2023 makes a consequential amendment to the
Credit Act. Currently the Credit Act relies on the
definition of large ADI under the Banking Act
1959 . As this definition is repealed along with the Banking
Executive Accountability Regime, Schedule 1 to the Financial
Accountability Regime (Consequential Amendments) Bill 2023
introduces an instrument making power into the Credit Act
which allows a Minister to define a large ADI for the
purpose of that Act.
[Schedule 1, items 69 and 70 of the
Financial Accountability Regime (Consequential Amendments) Bill
2023; section 5 of the National Consumer Protection Act
2009]
Transitional arrangements for insurance and superannuation industries
1.324
The Financial Accountability Regime will apply to the insurance and
superannuation industries from 18 months after commencement of the
Financial Accountability Regime Bill 2023. The Financial
Accountability Regime will apply in full to the accountable
entities in the insurance and superannuation industries from that
date.
[Subsection 9(4) of the Financial
Accountability Regime Bill 2023]
1.325
This will include the deferred remuneration obligations, which will
apply to remuneration that was determined after the start of the
first financial year after the Financial Accountability Regime
applies to the insurance and superannuation industries.
[Schedule 2, item 23 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.326
Accountable entities in the insurance and superannuation industries
can apply to register accountable persons under the Financial
Accountability Regime 30 days before the Financial
Accountability Regime applies to them.
[Schedule 2, item 22 of the Financial
Accountability Regime (Consequential Amendments) Bill
2023]
1.327
The amendments to the Life Insurance Act 1995 apply in
relation to pending applications of life companies to be registered
under that Act, when the Financial Accountability Regime applies.
[Schedule 2, item 25 of the Financial Accountability
Regime (Consequential Amendments) Bill 2023]
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Financial Accountability Regime Bill 2023
Financial Accountability Regime (Consequential Amendments) Bill 2023
Table of Contents:
Financial Accountability Regime Bill 2023
Overview
Human rights implications
Conclusion
Financial Accountability Regime (Consequential Amendments) Bill 2023
Overview
Human rights implications
Conclusion
Financial Accountability Regime Bill 2023
Overview
2.1 The Financial Accountability Regime Bill 2023 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .
2.2 The Financial Accountability Regime Bill 2023 creates a new accountability regime for the banking, insurance and superannuation industries. It establishes the Financial Accountability Regime, which extends the standards of conduct in the Banking Executive Accountability Regime to all APRA-regulated entities. This gives effect to recommendations 3.9, 4.12, 6.6, 6.7 and 6.8 of the Financial Services Royal Commission.
2.3 The Financial Accountability Regime imposes a strengthened responsibility and accountability framework within financial institutions. It recognises that decisions taken by directors and the most senior and influential executives of financial institutions are significant and have flow on effects for the Australian economy.
2.4 The Financial Accountability Regime Bill 2023 empowers the APRA and the ASIC to jointly administer and enforce the regime.
Human rights implications
2.5 The Financial Accountability Regime Bill 2023 engages the following human rights or freedoms:
· the right to a fair trial under Article 14 of the ICCPR;
· the imposition of strict liability for an offence;
· the right against self-incrimination under Article 14(3)(g) of the ICCPR;
· the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR; and
· the right to freedom of expression under Article 19(2) of the ICCPR .
Right to a fair trial under Article 14 of the ICCPR
2.6 Article 14 establishes rights to due judicial process and procedural fairness. These rights apply in both civil and criminal proceedings, and in matters before both courts and tribunals. [2]
2.7 The Financial Accountability Regime Bill 2023 engages these rights as it contains civil penalties and criminal offences for non-compliance, includes an evidential burden on a defendant, and provides for administrative and judicial review.
Assessment of Civil Penalties
2.8 Guidance Note 2: Offence provisions, civil penalties and human rights observes that civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR, regardless of the distinction between criminal and civil penalties in domestic law. [3] This is because the word ‘criminal’ has an autonomous meaning in international human rights law. Therefore, when a provision imposes a civil penalty, an assessment is required to ascertain whether it amounts to a ‘criminal’ penalty for the purposes of complying with the ICCPR. Such assessment requires consideration of the nature and purpose of the penalties, the classification of the penalty provisions under domestic law, and the severity of the penalties.
2.9 Sections 80 and 81 of the Financial Accountability Regime Bill 2023 contain civil penalties. Section 80 imposes a civil penalty where an accountable entity fails to comply with an obligation under Chapter 2 of the Financial Accountability Regime Bill 2023. Section 81 imposes a civil penalty where a person assists another person to contravene a civil penalty provision under the Financial Accountability Regime. Section 81 is the only civil penalty which applies to a person other than a body corporate. It is intended to deter an accountable person from aiding an accountable entity to contravene its accountability obligations. Providing this penalty for ancillary contraventions of the Financial Accountability Regime continues the approach of the Banking Executive Accountability Regime, providing continuity of expectations on executives.
2.10 The civil penalty provisions are expressly classified as civil penalties. While the domestic classification alone may not be determinative, it is indicative of the nature of the penalty. A criminal penalty is punitive and may include imprisonment in addition to pecuniary sanctions. In contrast, the civil penalties imposed by the Financial Accountability Regime Bill 2023 are regulatory and disciplinary in nature, and solely involve pecuniary penalties in the form of a debt payable to the Commonwealth. None of the civil penalty provisions carry a penalty of imprisonment nor a sanction of imprisonment for non-payment of a penalty, and a finding by a court that these sections have been contravened does not lead to the creation of a criminal record.
2.11 The amount of the civil penalty for a person other than a body corporate is calculated using a formula where the maximum penalty is at least 5,000 penalty units (currently $1,375,000) (see section 83). The maximum penalty may be greater depending on the benefit derived or detriment avoided by the person. This approach is consistent with existing legislative regimes that apply to industries regulated by the Financial Accountability Regime and allows a court to determine a penalty appropriate to the circumstances of the case.
2.12 The nature, classification and amount of the civil penalty provisions in the Financial Accountability Regime Bill 2023 show these provisions do not create criminal offences for the purposes of Articles 14 and 15 of the ICCPR.
New Criminal Offences
2.13 The Financial Accountability Regime Bill 2023 provides criminal offences relating to non-compliance with specific provisions. Most offences apply to accountable entities or their significant related entities rather than to natural persons such as accountable persons. Offences which could apply to a natural person involve non-compliance with provisions relating to:
· an investigation or examination (sections 46 and 51-53);
· a request for information or a direction of the Regulator (sections 63, 66 and 68); and
· a requirement relating to legal professional privilege (section 89).
2.14 The strong deterrent effect of criminal sanctions is necessary for the Financial Accountability Regime because of the central role that directors and senior executives of entities operating in the Australian financial system play in the Australian economy.
2.15 These offences are designed to deter misconduct and support the integrity of the regime through efficient oversight and regulation. Most of these offences replicate existing offences in the Banking Act 1959 that apply in relation to the Banking Executive Accountability Regime (sections 46, 51-53, 63, 66 and 68). It is appropriate to maintain the treatment of this conduct as a criminal offence to provide continuity between the regimes, and due to the serious nature of the wrongdoing involved which could compromise oversight and enforcement of the regime (see Chapter 2 of the Guide to Framing Commonwealth Offences).
2.16 The offences are modelled on the standard for all Australian criminal laws, including default elements from the Criminal Code .
2.17 Consistent with Article 14(1) of the ICCPR, an independent, impartial court will preside over all criminal proceedings brought under the Financial Accountability Regime Bill 2023 , which will be subject to established Australian court processes and procedures that protect the right to a fair trial including requirements relating to procedural fairness, evidence and sentencing.
2.18 As these offences are appropriately designed to ensure integrity of the Financial Accountability Regime and its proper regulation, and will be administered in accordance with Australia’s standards for criminal law proceedings, the offences created by Schedule 4 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 are consistent with Article 14 of the ICCPR.
2.19 Certain offences engage with other human rights; analysis of those interactions is set out in subsequent sections of this Statement.
Evidential burden
2.20 The Financial Accountability Regime Bill 2023 imposes an evidential burden on a defendant who wishes to raise a defence to the offence of disclosing information which was subject to a secrecy arrangement (section 68(3)). As the provision imposes an evidentiary burden on the defendant, it engages the right to a fair trial under Article 14 of the ICCPR.
2.21 The Financial Accountability Regime Bill 2023 provides a range of exceptions to the section 68 offence where disclosure is lawfully permitted (sections 69-75). The offence does not apply where the information was already lawfully in the public domain, or was disclosed to a legal representative in order to seek advice or to another person who is also subject to relevant secrecy arrangements for the purpose of another exception. It is also not an offence where the disclosure was in accordance with the Australian Prudential Regulation Authority Act 1998 , the Australian Securities and Investments Commission Act 2001 , a determination of the Regulator, or the Minister rules of the Financial Accountability Regime. In addition to these exceptions, which operate as offence-specific defences, disclosure may also take place if it is required by an order or direction by a court or a tribunal.
2.22 Placing an evidential burden in relation to those defences is appropriate, proportionate and reasonable. Principally, this is because in the vast majority of cases it will be peculiarly within the knowledge of the defendant how the information may have been publicly accessed, or the means by which the conduct was authorised by another law of the Commonwealth. This in turn is due to the wide range of publicly available information and circumstances in which other laws could authorise or require disclosure. Evidence establishing that disclosure was to a legal representative for the purpose of seeking legal advice or to another person as permitted by the other exceptions is also peculiarly within the defendant’s knowledge and control.
2.23 Placing an evidentiary burden on the defendant is further justified because it would be significantly more difficult for the prosecution to disprove these matters than it would be for the defendant to establish these matters.
2.24 Placing an evidential burden of proof on the defendant is also justified as it aligns with the approach taken in other similar frameworks. For example, it is consistent with the treatment of other protected information collected under prudential frameworks which is held by APRA including information collected under the predecessor regime to the Financial Accountability Regime, the Banking Executive Accountability Regime under Part IIAA of the Banking Act 1959 (see section 56 of the Australian Prudential Regulation Authority Act 1998 ). Similarly, an evidential burden of proof exists in relation to the other prudential frameworks which interact with the regime including a matter raised under section 11CI of the Banking Act 1959, section 109A of the Insurance Act 1973 , section 231A of the Life Insurance Act 1995 . Consistency of approach across this complex legal framework is important to support understanding and application of the law.
2.25 In summary, engaging the right to a fair trial in this way is necessary because it achieves the legitimate objective of ensuring that directions given by the Regulator (subject to a secrecy arrangement) is not disclosed in ways that may cause harm, and it ensures consistency of approach across relevant laws. Placing an evidentiary burden on the defendant therefore ensures that a secrecy offence is effectively prosecuted. As such, the provision is consistent with the right to a fair trial under Article 14 of the ICCPR.
Merits and judicial review
2.26 Article 14 establishes rights to due judicial process and procedural fairness. These rights apply in both civil and criminal proceedings, and in matters before both courts and tribunals. [4]
2.27 The Financial Accountability Regime Bill 2023 engages and supports these rights by providing court and tribunal oversight of administrative decisions. The Financial Accountability Regime Bill 2023 expressly provides for merits review of certain decisions made under the regime by the Administrative Appeals Tribunal (see section 91).
2.28 Certain decisions of the Minister and of the Regulator are not subject to merits review, consistent with the Administrative Review Council’s publication “ What Decisions Should be Subject to Merits Review?” . [5] In particular, decisions which are legislation-like in character, and decisions which are procedural or preliminary as they precede a substantive decision, are not suitable for administrative review. Likewise, other decisions are not reviewable where the benefits of not providing administrative review outweigh the objectives of providing it. This applies to decisions of the Regulator and the Minister that are made in favour of the affected person by reducing the scope of their responsibilities or by providing flexibility or an exemption from compliance with the Financial Accountability Regime (see sections 11 and 16 of the Financial Accountability Regime Bill 2023). Where the Minister exempts an accountable entity from the regime, the exemption must include a statement setting out the reasons for this exemption. In relation to other decisions, the Minister must provide reasons on request, as required by section 13 of the Administrative Decisions (Judicial Review) Act 1977 . This supports procedural fairness.
2.29 Judicial review of an exercise of power or performance of function by the Regulators is also available, unless on the grounds of jurisdictional error solely in relation to one Regulator not having the other’s agreement to act, or their arrangement for administration not being in place or available on their website (see section 95).
2.30 As such, the Financial Accountability Regime Bill 2023 upholds and does not unreasonably limit the right to a fair trial or fair hearing with respect to administrative decisions and judicial review.
Strict Liability Offence
2.31 The Financial Accountability Regime Bill 2023 imposes a strict liability offence in section 44 where an accountable entity or a significant related entity of an accountable entity appoints a person, disqualified under the FAR, as an ‘accountable person’. This includes appointments on a temporary basis.
2.32 This offence does not apply to a natural person, nor could ancillary liability under section 81 apply as such liability relates to contravention of civil penalty provisions, not to offences.
2.33 The prosecution will not need to prove fault as part of a strict liability offence. This approach is appropriate here as there is no ambiguity as to whether a person is disqualified or not. The deterrence provided by a strict liability offence is requested because allowing a disqualified person to act as or be an accountable person would go against the prudential and conduct-related standards the FAR seeks to strengthen. Recognising the importance of such deterrence, section 44 also provides a fault-based offence with a higher penalty than the strict liability offence (250 penalty units compared to 60 penalty units) to cater for more serious situations where the mental element can be proven.
2.34 The penalty for the strict liability offence for entities complies with the requirements of the Guide to Framing Commonwealth Offences as:
· the offence is not punishable by imprisonment;
· the maximum penalty is at the maximum allowable for strict liability offences (60 penalty units for individuals (currently $16,500)); and
· the harm to consumers and overall financial stability is so significant that fault should not be an element of the offence.
Right against self-incrimination under Article 14(3)(g) of the ICCPR
2.35 The Financial Accountability Regime Bill 2023 empowers the Regulator or an investigator to require a person to cooperate and assist with investigations and examinations (see section 46). This includes answering questions put to the person, signing of a record provision of certain documents, books or accounts.
2.36 The investigation and examination powers engage the right against self-incrimination under Article 14(3)(g) of the ICCPR because they provide that a person cannot refuse to cooperate and/or assist with an investigation or examination on the basis that doing so would incriminate the person. This includes the person refusing to: appear for examinations, answer questions, provide documents, books or accounts, and/or, sign a record. A failure to act in a certain way or provide information required is punishable by a criminal penalty of up to 50 penalty units (currently, $13,750).
2.37 However, the Financial Accountability Regime Bill 2023 balances the Regulator’s or investigator’s need to access information with a natural person’s right against self-incrimination by limiting the use of incriminating material supplied by the person. Specifically, incriminating information or documents provided (and identified as such) cannot be used against the individual in criminal proceedings or in proceedings where the person may be liable to a criminal penalty (see section 88).
2.38 The protection does not, however, apply to proceedings concerning the falsity of the information or documents provided. This is consistent with sections 137.1 and 137.2 of the Criminal Code which create offences for providing false or misleading information. Incriminating evidence supplied by an individual can also be used to investigate unlawful conduct by that person and a third party, including in subsequent proceedings against a third party.
2.39 These provisions are required in this manner because the material and evidence necessary for the Regulator or investigator to perform its regulatory function is likely to only be available from certain individuals in an entity. Obtaining such information would be critical to give effect to the regulatory functions of the Financial Accountability Regime which in turn ensures the stability of Australia’s financial system and prudential standing.
2.40 Engaging the right against self-incrimination in this way is necessary and justified as the public benefit in removing the liberty outweighs the loss to the individual. The regulatory powers in the Financial Accountability Regime Bill 2023 are therefore consistent with the right against self-incrimination under Article 14(3)(g) of the ICCPR.
Right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR
2.41 Privacy is a broad concept and includes a right to information privacy. Article 17 of the ICCPR prohibits unlawful or arbitrary interferences with a person’s privacy, family, home or correspondence. It also provides that everyone has the right to protection from the law against such interference or attacks.
2.42 The Human Rights Committee has interpreted the term ‘unlawful’ to mean that interferences cannot take place except in cases envisaged by law, which itself must comply with the provisions, aims and objectives of the ICCPR. The Human Rights Committee has also indicated that an interference will not be considered to be ‘arbitrary’ if it is provided for by law, is in accordance with the provisions, aims and objectives of the ICCPR, and is reasonable in the particular circumstances. [6]
2.43 The Financial Accountability Regime Bill 2023, through the notification obligations, requires an accountable entity to provide particular information about the entity and its accountable persons. Additionally, the information gathering powers of the Financial Accountability Regime Bill 2003 allow the Regulator to request information from accountable entities, its significant related entities or accountable persons. Insofar as the application of these provisions results in the collection, use, sharing or disclosure of information (including personal information), they engage the right to privacy under Article 17 of the ICCPR.
2.44 Mechanisms in the Financial Accountability Regime Bill 2023 which involve collection, use and or disclosure of information include:
· accountable entities’ notification obligations, to notify the Regulator of the entity’s structure and key personnel through accountability statements and accountability maps (Chapter 2 part 6 of the Financial Accountability Regime Bill 2023);
· the Regulator’s registration function, which includes registering and keeping a register of accountable persons (Chapter 3 part 3 of the Financial Accountability Regime Bill 2023);
· information sharing powers, to allow one Regulator to disclose information or documents to the other for the purpose of their functions or powers, such as maintaining the register of accountable persons or conducting an investigation (section 39 of the Financial Accountability Regime Bill 2023); and
· the Regulator’s power to request information for a purpose under the regime, such as ensuring or investigating compliance (section 62 of the Financial Accountability Regime Bill 2023).
2.45 These mechanisms are necessary for the Regulator to carry out its functions to administer and enforce the regime; it would not be possible to achieve the objectives of the Financial Accountability Regime Bill 2023 to ensure accountability of entities and executives in the financial sectors without collecting information about relevant individuals.
2.46 In relation to the register of accountable persons, the Financial Accountability Regime Bill 2023 requires this to include details of each accountable person such as their name, date of registration, details of any disqualification as an accountable person, and other relevant information prescribed by the Regulator rules. Section 40(5) allows the Regulator to make any such information available for public inspection, for instance disqualification information. Maintaining the register is necessary to ensure that entities do not inadvertently appoint a disqualified individual. Moreover, providing public access to this information allows accountable entities and members of the public to ensure that their financial representatives are correctly registered and qualified to provide services, which justifies the impact upon accountable persons’ right to privacy.
2.47 To ensure a balanced approach and avoid arbitrary interferences with privacy, the Regulator’s powers to collect and use personal information under the Financial Accountability Regime Bill 2023 are tailored to the purpose of carrying out its functions and powers. This is expressed directly in the powers to share information (section 39) and request information (section 62). It is also evident in the design of section 40 (register) as the types of information collected for the register are designed to only capture information relevant to the person’s registration and responsibilities, not other personal information.
2.48 In addition, the Regulator is also subject to information handling obligations which ensure personal information is collected, used and stored securely in accordance with the Privacy Act 1988 , which gives effect to the right to privacy in Australia.
2.49 This approach ensures that any limitation on privacy is reasonable, as it is proportionate to the legitimate aim of the Financial Accountability Regime of transparency and accountability.
2.50 The provisions in the Financial Accountability Regime Bill 2023 relating to the collection, use, sharing or disclosure of information are therefore consistent with the right to protection against arbitrary or unlawful interference with privacy under Article 17 of the ICCPR, as they are explicitly specified for in appropriate circumstances.
Right to freedom of expression under Article 19(2) of the ICCPR
2.51 The Financial Accountability Regime Bill 2023, through its secrecy provisions, allows the Regulator to indicate in writing that directions it has provided to an accountable entity must not be publicly disclosed (see section 67). Specifically, the Financial Accountability Regime Bill 2023 allows the Regulator to make a secrecy determination if it considers it necessary to protect consumers and/or to promote the stability of the financial system in Australia. Except for limited circumstances, a breach of these secrecy provisions may result in imprisonment of up to two years.
2.52 These provisions engage the right to freedom of opinion and expression under Article 19(2) of the ICCPR because they prevent entities or persons working in the entity from disclosing details of a direction given to them. Consequentially, they also restrict public access to information relating to such directions.
2.53 Article 19(2) of the ICCPR provides that everyone has the right to freedom of expression, including the freedom to impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media.
2.54 Article 19(3) provides that this right may be limited on the grounds including respect for the rights of others, or the protection of national security or public order and that any limitations must be prescribed by legislation and be reasonable, necessary and proportionate to achieve the desired purpose.
2.55 The secrecy provisions in the Financial Accountability Regime Bill 2023 are intended to prevent significant losses to consumers as well as fiscal instability that may arise as a result of unauthorised disclosure of information in the directions. Furthermore, these provisions can also prevent public detriment by averting contagions within the financial system.
2.56 The secrecy provisions have been balanced with a range of exceptions which allow for the disclosure of information in appropriate circumstances. For example, disclosure is allowed where information is subject to a direction that is already public or otherwise authorised by the Regulator. Disclosure to a legal representative is also allowed for the purpose of obtaining legal advice.
2.57 The exceptions identified in the Financial Accountability Regime Bill 2023 ensure that the secrecy provisions are proportionate as they do not unduly or unfairly limit disclosure. As such these provisions are consistent with the right to freedom of expression under Article 19(2) of the ICCPR.
Conclusion
· the strict liability offences are appropriate and consistent with the requirements of the Guide to Framing Commonwealth Offences;
· the investigation and examination powers are consistent with the right against self-incrimination under Article 14(3)(g) of the ICCPR;
· the secrecy provisions are consistent with the right to freedom of expression under Article 19(2) of the ICCPR as well as the right to a fair trial under Article 14 of the ICCPR; and
· the notification obligations and information gathering and use powers (including keeping a register of accountable persons) are consistent with the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR.
2.59 As such, the Financial Accountability Regime Bill 2023 is compatible with human rights because to the extent that it may limit human rights or freedoms, those limitations are reasonable, necessary and proportionate.
Financial Accountability Regime (Consequential Amendments) Bill 2023
Overview
2.60 The Financial Accountability Regime (Consequential Amendments) Bill 2023 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .
2.61 Schedules 1 and 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 make consequential amendments and transitional arrangements to support establishment of the Financial Accountability Regime by the Financial Accountability Regime Bill 2023.
2.62 The Financial Accountability Regime imposes an accountability framework for certain entities in the banking, insurance and superannuation industries (accountable entities, and their significant related entities), and their directors and most senior and influential executives (accountable persons).
2.63 The Financial Accountability Regime will first apply to the banking industry (ADIs and their authorised non-operating holding companies). Entities in the banking industry are currently subject to the obligations under the Banking Executive Accountability Regime, under the Banking Act 1959 . The Financial Accountability Regime (Consequential Amendments) Bill 2023 makes consequential amendments to other legislation and transitional arrangements so that these entities can be transitioned from the Banking Executive Accountability Regime to the Financial Accountability Regime, ensuring continuity of practices and requirements.
2.64 The Financial Accountability Regime will also apply to other APRA-regulated entities in the insurance and superannuation industries. For such entities there is a deferred application so they have sufficient to adjust their systems and processes before they are subject to the obligations under the regime. The Financial Accountability Regime (Consequential Amendments) Bill 2023 makes consequential amendments and transitional arrangements to assist this process, such as allowing for early application for registration of accountable persons, to prepare for the start date of the regime for the relevant industry.
Human rights implications
2.65 The Financial Accountability Regime (Consequential Amendments) Bill 2023 engages the following human rights or freedoms under the ICCPR:
· the right to a fair trial and due process under Article 14 of the ICCPR;
· the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR; and
· the right to freedom of expression under Article 19(2) of the ICCPR.
Right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR
2.66 Privacy is a concept that is broad in scope and includes a right to information privacy. Article 17 of the ICCPR prohibits unlawful or arbitrary interferences with a person’s privacy, family, home or correspondence. It also provides that everyone has the right to protection from the law against such interference or attacks.
2.67 The Human Rights Committee has interpreted the term ‘unlawful’ to mean that interferences cannot take place except in cases envisaged by law, which itself must comply with the provisions, aims and objectives of the ICCPR. The Human Rights Committee has also indicated that an interference will not be considered to be ‘arbitrary’ if it is provided for by law, is in accordance with the provisions, aims and objectives of the ICCPR, and is reasonable in the particular circumstances. [7]
2.68 The Financial Accountability Regime engages the right to privacy where application of provisions results in the collection, use and disclosure of personal information.
2.69 The right to privacy is most directly engaged by the substantive obligations and powers of the regime established in the Financial Accountability Regime Bill 2023. The Financial Accountability Regime (Consequential Amendments) Bill 2023 also engages the right to privacy through provisions that facilitate the transition of the banking, insurance and superannuation sectors into the regime.
2.70 In particular, the Financial Accountability Regime (Consequential Amendments) Bill 2023 contains provisions that:
· mean a notification obligation or an application for registration under the Banking Act 1959 (which established the Banking Executive Accountability Regime) is continued under the Financial Accountability Regime (Schedule 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, part 2, in particular items 6, 8 and 14);
· allow an early application for registration of an accountable person under the Financial Accountability Regime, so the person may begin their responsibilities on the start date for the relevant industry (Schedule 2, items 8 and 22); and
· enable information collected under the Banking Executive Accountability Regime to be used to investigate breaches under the Financial Accountability Regime (Schedule 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 29, 30, 31, and 33).
2.71 These provisions are designed to facilitate a smooth transition into the Financial Accountability Regime, and are important for integrity of the regime.
2.72 The information required through the registration and notification processes is essential for the Regulator to administer and enforce the Financial Accountability Regime. The substantive provisions are designed to ensure any impact on privacy is reasonable and proportionate to the aim of greater transparency and accountability in the regulated sectors. For instance, only information relevant to a person’s role and responsibilities under the regime is collected, not other personal information (Section 39 of the Financial Accountability Regime Bill 2023). Consistent with this, the Financial Accountability Regime (Consequential Amendments) Bill 2023 requires the Regulator’s annual reports on investigations not include information about a particular person (Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 14 and 19).
2.73 Use of information collected in regulating or investigating compliance with the Banking Executive Accountability Regime is necessary to ensure an effective regulatory transition to the new Regime. In relation to regulatory uses of information collected under the Banking Executive Accountability Regime, this can occur regardless of whether the relevant breach occurred before or after the commencement of the Financial Accountability Regime. However, restrictions on sharing information between the Regulators in relation to such information brought in as part of the Financial Accountability Regime will apply. This means the information must be used for the purpose of fulfilling the Regulator’s functions or powers under the regime, not for other purposes (see section 39 of the Financial Accountability Regime Bill 2023). This approach ensures any impact on privacy is not arbitrary and is proportionate to the broader goals of ensuring accountability and integrity of the regime.
2.74 The provisions in the Financial Accountability Regime (Consequential Amendments) Bill 2023 relating to the collection, use, sharing or disclosure of information are therefore consistent with the right to protection against arbitrary or unlawful interference with privacy under Article 17 of the ICCPR, as they are explicitly specified for in appropriate circumstances.
Right to freedom of expression under Article 19(2) of the ICCPR
2.75 Article 19(2) of the ICCPR provides that everyone has the right to freedom of expression, including the freedom to impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media.
2.76 Article 19(3) provides that this right may be limited on the grounds including respect for the rights of others, or the protection of national security or public order and that any limitations must be prescribed by legislation and be reasonable, necessary and proportionate to achieve the desired purpose.
2.77 The Financial Accountability Regime (Consequential Amendments) Bill 2023 engages the right to freedom of opinion and expression under Article 19(2) because it transitions secrecy arrangements under the Banking Executive Accountability Regime in the Banking Act 1959 through to the Financial Accountability Regime (Schedule 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 15, 29 and 31).
2.78 The Financial Accountability Regime Bill 2023, through its secrecy provisions, allows the Regulator to indicate in writing that directions it has provided to an accountable entity must not be publicly disclosed (see section 67). Specifically, the Financial Accountability Regime Bill 2023 allows the Regulator to make a secrecy determination if it considers it necessary to protect consumers and/or to promote the stability of the financial system in Australia. Except for limited circumstances, a breach of these secrecy provisions may result in imprisonment of up to two years.
2.79 These provisions engage the right to freedom of opinion and expression under Article 19(2) of the ICCPR because they prevent entities or persons working in the entity from disclosing details of a direction given to them. Consequentially, they also restrict public access to information relating to such directions.
2.80 As such, provisions of the Financial Accountability Regime (Consequential Amendments) Bill 2023 which support the transition of substantive provisions and active secrecy arrangements under the Banking Act 1959 (which established the Banking Executive Accountability Regime) to the Financial Accountability Regime engage the right to freedom of expression in the same way.
2.81 The secrecy provisions of the regimes are intended to prevent significant losses to consumers as well as fiscal instability that may arise as a result of unauthorised disclosure of information in the directions. Furthermore, these provisions can also prevent public detriment by averting contagions within the financial system.
2.82 The secrecy provisions have been balanced with a range of exceptions which allow for the disclosure of information in appropriate circumstances. For example, disclosure is allowed where information is subject to a direction that is already public or otherwise authorised by the Regulator. Disclosure to a legal representative is also allowed for the purpose of obtaining legal advice. The exceptions ensure that the secrecy provisions are proportionate as they do not unduly or unfairly limit disclosure.
2.83 As such, the provisions of the Financial Accountability Regime (Consequential Amendments) Bill 2023 which provide transitional arrangements for secrecy arrangements under other legislation are consistent with the right to freedom of expression under Article 19(2) of the ICCPR.
Protected information - rights under Articles 14 and 19 of the ICCPR
2.84 The Financial Accountability Regime (Consequential Amendments) Bill 2023 contains provisions relating to ‘protected information’ which engage the right to a fair trial in Article 14 of the ICCPR as well as the right to freedom of expression in Article 19 of the ICCPR.
2.85 Article 14 establishes rights to due judicial process and procedural fairness, which Australia applies in both civil and criminal proceedings. This right is engaged by provisions which establish criminal offences and evidential burdens on defendants in relation to offences for disclosure of 'protected information.
2.86 As noted above, Article 19 provides that everyone has the right to freedom of expression, including the freedom to seek, receive and impart information and ideas in any form. Article 19(3) provides that this right may be limited on the grounds including respect for the rights of others, or the protection of national security or public order and that any limitations must be prescribed by legislation and be reasonable, necessary and proportionate to achieve the desired purpose. This right is engaged by provisions which limit disclosure of and access to information which is protected information under the Financial Accountability Regime.
2.87 Most information obtained or disclosed under the Financial Accountability Regime will be ‘protected information’ within the meaning of each Regulator’s enabling legislation. This means that the information will be subject to APRA’s and ASIC’s standard secrecy and confidentiality obligations. Where the Regulators’ legislation is inconsistent, Schedules 1 and 2 to the Financial Accountability Regime (Consequential Amendments) Bill 2023 makes consequential amendments to align the approach in relation to the Financial Accountability Regime. This approach protects confidential information of financial services businesses, and encourages entities to be open and honest in their dealings with APRA and ASIC.
2.88 The Financial Accountability Regime (Consequential Amendments) Bill 2023 achieves this by amending relevant definitions of protected information , protected document , and prudential regulation framework law to include information obtained or disclosed under the Financial Accountability Regime (Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 1 and 5 to 8).
2.89 The Financial Accountability Regime (Consequential Amendments) Bill 2023 also introduces a prohibition into the Regulators’ legislation to protect against the disclosure of information that is protected information because of the Financial Accountability Regime (Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 9, 16 and 17). This has the effect of extending the existing offence in section 56 of the Australian Prudential Regulation Authority Act 1998 to cover the regime, and introducing a new, equivalent offence into section 127 of the Australian Securities and Investments Commission Act 2001 to support a consistent regulatory approach.
2.90 These offences are necessary to protect the personal and sensitive financial information collected under the regime, and aim to deter inappropriate disclosure. It is appropriate to have a criminal offence given the sensitivity of the information covered by the prohibition on disclosure, which could compromise oversight of the Financial Accountability Regime or result in harm to regulated entities or persons if disclosed or used other than in accordance with the legislation.
2.91 Importantly, consistent with Article 14(1) of the ICCPR, an independent, impartial court will preside over any criminal proceedings, which will be subject to established Australian court processes and procedures that protect the right to a fair trial including requirements relating to procedural fairness, evidence and sentencing.
2.92 Exemptions to the secrecy provisions will allow for the appropriate sharing of information by APRA and ASIC (see Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 10 and 17). A defendant bears an evidential burden in relation to sharing of information on the reliance of these exemptions. Shifting the evidential burden to the person who disclosed the information is justified and not unduly onerous as the information subject to the new provisions would be peculiarly within the knowledge and control of the defendant, and the defendant would have immediate knowledge of the purpose and circumstances of any disclosure. In particular, the defendant could readily establish application of exemptions such as where disclosure was of information contained in the register of accountable persons to an accountable entity or the individual to whom the information relates, or of information about disqualification of an accountable person, or where disclosure was between APRA and ASIC in connection with carrying out their regulatory functions and powers under the regime. This approach also provides consistency with the existing approach to the evidential burden for similar existing exemptions in section 59 of the Australian Prudential Regulation Authority Act 1998 and section 127 of the Australian Securities and Investments Commission Act 2001 .
2.93 Information obtained or disclosed under the Financial Accountability Regime that is protected information (as defined by the enabling legislation for APRA and ASIC) will be exempt from the Freedom of Information Act 1982 . That Act establishes a scheme of open access to government documents, subject to certain exemptions. Such an exemption already exists for protected information held by APRA. The Financial Accountability Regime (Consequential Amendments) Bill 2023 extends the exemption to also cover information obtained or disclosed under the Financial Accountability Regime that is held by ASIC (Schedule 1 to the Financial Accountability Regime (Consequential Amendments) Bill 2023, items 1, 5 to 9, and 17).
2.94 This is necessary to avoid a situation where some but not all information collected under the regime is exempt from the freedom of information scheme, which could create confusion and inconsistent protection of personal and potentially sensitive financial information from disclosure. It also supports efficient regulation of the as APRA and ASIC are joint regulators of the regime and will have equivalent powers and procedures. For these reasons, the exemption from the Freedom of Information Act 1892 is a reasonable, necessary and proportionate limitation on the right to freedom of expression under the ICCPR.
2.95 As such, the creation of a new offence and imposition of an evidential burden on a defendant are also consistent with the due process rights in Article 14 of the ICCPR. Any limitations on the right to freedom of expression under Article 19 of the ICCPR are reasonable and proportionate to the aim of the legislation to establish a strong accountability regime and encourage cooperative and accountable behaviour.
Conclusion
2.96 In summary:
· the notification obligations and regulatory powers to gather and use information are consistent with the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR.
· the transitional arrangements relating to secrecy are consistent with the right to freedom of expression under Article 19 of the ICCPR;
· the creation of a new offence and imposition of evidential burdens on a defendant are also consistent with the due process rights in Article 14 of the ICCPR.
· The ‘protected information’ provisions are a reasonable and proportionate limitation on the right to freedom of expression, consistent with Article 19(3) of the ICCPR.
2.97 As such, the Financial Accountability Regime (Consequential Amendments) Bill 2023 is compatible with human rights because to the extent that it may limit human rights or freedoms, those limitations are reasonable, necessary and proportionate.
[1] https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22publications%2Ftabledpapers%2Fbc83795c-b7fa-4b42-a93b-fa012cffffc2%22
[2] Australian Government Attorney-General’s Department, Fair Trial and Fair Hearing Rights , available at: https://www.ag.gov.au/rights-and-protections/human-rights-and-anti-discrimination/human-rights-scrutiny/public-sector-guidance-sheets/fair-trial-and-fair-hearing-rights
[3] Parliamentary Joint Committee on Human Rights, Practice Note 2: Offence provisions, civil penalties and human rights, December 2014, available at: http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Human_Rights/Guidance_Notes_and_Resources
[4] Australian Government Attorney-General’s Department, Fair Trial and Fair Hearing Rights , available at: https://www.ag.gov.au/rights-and-protections/human-rights-and-anti-discrimination/human-rights-scrutiny/public-sector-guidance-sheets/fair-trial-and-fair-hearing-rights .
[5] Administrative Review Council, What decisions should be subject to merits review? , 1999, available at: https://www.ag.gov.au/legal-system/administrative-law/administrative-review-council-publications/what-decisions-should-be-subject-merit-review-1999 .
[6] General comment No. 16: Article 17 (Right to privacy), Thirty second session (1988) at [3]-[4].
[7] General comment No. 16: Article 17 (Right to privacy), Thirty second session (1988) at [3]-[4].