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FAR Frontiers: Super Funds & Insurance Companies Confronting the Next Phase of FAR Implementation.

Authored by Himashi Cameron

March 15, 2024 was a significant milestone for banking governance in Australia. The date marks the transition from the Banking Executive Accountability Regime (BEAR) to the Financial Accountability Regime (FAR), ushering in a heightened era of accountability and transparency for Banks.

Now, the spotlight shifts to super funds and insurance companies. Impacted institutions must comply with FAR by 15 March 2025. These entities, previously outside the scope of BEAR, are now gearing up for their own implementation of FAR.

FAR requirements have a broad span and include:

  • Accountability obligations: Applying to both the entity, its significant related entities (SREs), and certain individuals, including board members and key senior executives, most of the accountability obligations pivot on demonstrating ongoing systems, processes, monitoring and reporting to evidence that reasonable steps have been taken to satisfy the accountability obligations. Depending on the specific circumstances of the super fund or insurance company, requirements to document accountability statements and accountability maps, and register these artefacts with APRA, may also apply.

  • Deferred Remuneration: Deferral of 40% of variable compensation for a minimum of 4 years for accountable persons. Where there is a breach by the accountable person, some or all of this deferred compensation may be forfeited.

  • Notification Obligations: Entities are required to notify APRA & ASIC of certain events, such as changes to accountable persons or when the entity has reasonable grounds to believe that there has been a breach of FAR obligations, within prescribed timelines, generally 30 days.

  • Consequence Management: Both APRA & ASIC have the authority to take enforcement actions against both individuals or entities found to be in breach of their accountability obligations, including deregistering individuals and imposing civil penalties on entities.

What insights can super funds & insurance companies draw from the Banks’ implementation experience?

  • Accountable persons with personal accountability in their area of responsibility should have a clear understanding of their accountability obligations and access to quality support and guidance. By addressing these questions and concerns proactively, organisations can navigate an efficient course through their FAR implementation.

  • There has been much discussion and consideration of what constitutes reasonable steps both for the entity and the individual. What is appropriate evidence? What measures are required to be in place? How to demonstrate reasonable steps in different contexts or to different risk classes?

  • Identification of SREs can be challenging for organisations with complex corporate or trust structures, especially for Responsible Superannuation Entities in corporate groups, for which the definition of SRE extends to connected entities, including holding companies.

Unsurprisingly, when navigating the implementation of a new regulation, our clients have been working through a myriad of questions. Complimenting KWM’s legal advice on FAR obligations, Owl Advisory can assist with the review of existing risk management frameworks and policies, prepare new policies for compliance with FAR, undertake gap analysis, prepare accountability statements, assist with reporting processes and help to foster a culture of accountability.  

To have a conversation about your FAR implementation, please contact Tim Bednall, Director Owl Advisory by KWM or Himashi Cameron, General Manager, Compliance Advisory, Owl Advisory by KWM.

This publication is a joint publication from King & Wood Mallesons, and KWM Compliance Pty Ltd (ACN 672 547 027) trading as Owl Advisory by KWM.   KWM Compliance Pty Ltd is a company wholly owned by the King & Wood Mallesons Australian partnership.  KWM Compliance Pty Ltd provides non-legal compliance and governance risk advisory services for businesses.  KWM Compliance Pty Ltd is not an incorporated legal practice and does not provide legal services. Laws concerning the provision of legal services do not apply to KWM Compliance Pty Ltd. 

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