Treasury has released for consultation draft Minister Rules for the Financial Accountability Regime. Background.

The Minister Rules support the Financial Accountability Regime Bill 2022 and prescribe:

• responsibilities and positions which cause an individual to be an accountable person of an accountable entity, and therefore subject to the regime;
• when an accountable entity meets the enhanced notification threshold based on total assets reported to APRA; and
• the manner in which a written record of an examination of a person can be authenticated and is admissible as prima facie evidence of the statements it records.

Positions and responsibilities

The Rules prescribe a number of responsibilities and positions that cause a person to be an accountable
person of an accountable entity that is an ADI, general insurer, life company, private health insurer or an RSE licensee, as well as additional responsibilities for each sector or particular types of accountable entity.

Section 5(2) prescribes 13 responsibilities that cover senior executives with responsibility for management (and in some cases control) of specified activities and functions. A person’s position or title is not relevant to determining whether a person has a prescribed responsibility.

“Each of the following responsibilities, relating to the accountable entity, are prescribed:
(a) senior executive responsibility for management or control of the accountable entity’s:
(i) business activities; or
(ii) financial resources; or
(iii) operations;
(b) senior executive responsibility for management of the accountable entity’s overall risk controls or overall risk management arrangements;
(c) senior executive responsibility for management of the accountable entity’s information management (including information technology systems);
(d) senior executive responsibility for management of the accountable entity’s:
(i) internal audit function; or
(ii) compliance function; or
(iii) human resource function; or
(iv) anti-money laundering function; or
(v) dispute resolution function (whether internal or external, or both);
(e) senior executive responsibility for management of the accountable entity’s client or member remediation programs (including hardship arrangements);
(f) senior executive responsibility for management of the accountable entity’s breach reporting;
(g) senior executive responsibility for management or control of the business activities of a significant related entity of the accountable entity.
(3) For the purposes of subsection (2), a person does not have senior executive responsibility for management of an activity or function merely because the person is carrying out the activity or function”.

The draft rules do not include end-to-end product responsibility in the list of prescribed responsibilities.

The position of member of the board of directors (or equivalent) of the accountable entity is prescribed.

Additional responsibilities are prescribed for general insurers, life companies and private health insurers.

The enhanced notification threshold

The Rules prescribe the enhanced notification threshold for each type of accountable entity regulated by the Financial Accountability Regime:

• An ADI that is an accountable entity meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $10 billion at the start of the financial year.
• A general insurer meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $2 billion at the start of the financial year of the entity.
• A life company meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $4 billion at the start of the financial year of the entity.
• A private health insurer meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $2 billion at the start of the financial year of the entity.
• An RSE licensee meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $10 billion at the start of the financial year of the entity.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.