The Financial Sector Reform package of 4 bills including the Financial Accountability Regime Bill 2022 will be delayed until 2023. Background.
The delay enables consultation on the Greens’ proposal that individuals be subject to civil penalties for breaches of their accountability obligations.
The proposed amendments include that clause 18 of the Financial Accountability Regime Bill be amended to provide that failure of an accountable person to comply with each of the person’s accountability obligations is a contravention of a civil penalty provision.
What is an accountability obligation?
Clause 21(1) of the Bill provides that the accountability obligations of an accountable person of an accountable entity, or of a significant related entity of an accountable entity, are:
“to conduct the responsibilities of their position as an accountable person:
(a) by acting with honesty and integrity, and with due skill, care and diligence; and
(b) by dealing with the Regulator in an open, constructive and cooperative way; and
(c) by taking reasonable steps in conducting those responsibilities to prevent matters from arising that would (or would be likely to) adversely affect the prudential standing or prudential reputation of the accountable entity; and
(d) by taking reasonable steps in conducting those responsibilities to prevent matters from arising that would (or would be likely to) result in a material contravention by the accountable entity of any of the following:
(i) the Act;
(ii) the Banking Act 1959;
(iii) the credit legislation (within the meaning of the National Consumer Credit Protection Act 2009);
(iv) the Financial Sector (Collection of Data) Act 2001;
(v) the financial services law (within the meaning of section 761A of the Corporations Act 2001);
(vi) the Insurance Act 1973;
(vii) the Life Insurance Act 1995;
(viii) the Private Health Insurance (Prudential Supervision) 14 Act 2015;
(ix) the Superannuation Industry (Supervision) Act 1993;
(x) regulations, instruments, directions or orders made under a law referred to in any of subparagraphs (i) to (ix).”
Under clause 83(3) of the Bill, the maximum penalty amount for a contravention by a person other than a body corporate of a civil penalty provision of the Act is the greater of the following:
(a) 5,000 penalty units (currently $222 a unit, a total of $1.11M);
(b) if the court can determine the benefit derived and detriment avoided because of the contravention—that amount multiplied by 3.
The Greens also propose that an accountable entity cannot indemnify an accountable person against the consequences of breaching an obligation under the Act or pay, or agree to pay, a premium for a contract insuring such a person against the consequences of breaching an obligation under the Act.
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Author: David Jacobson
Principal, Bright Corporate Law
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.
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