Kate O'Rourke

Superannuation funds have had plenty of time to prepare for the start of the new Financial Accountability Regime on March 15, according to ASIC Commissioner, Kate O’Rourke.

O’Rourke tells Investment Magazine that the regulators jointly overseeing the new accountability regime, ASIC and APRA, have consulted extensively with the superannuation sector including conducting workshops and issuing explanatory materials.

But she says they would also be working to make the introduction of the new regime as smooth as possible, with a one-stop portal for funds to upload the details of accountable people and other details required under the regime.

Her comments came before the Investment Magazine Chair Forum kicks off this Thursday, where accountability and governance at a trustee board level will take centre stage of the discussion. The forum will be attended by almost 40 chairs, deputy chairs and investment committee chairs representing 24 superannuation funds, supervising the management of over $2 trillion of fiduciary capital.

“The new regime is about driving an uplift in accountability for both the entities and people who have leadership roles and responsibilities,” O’Rourke says.

“It has been successfully applied to the banks and this next phase is recognizing the importance of both insurance and superannuation, and the importance of having very clear accountability for the functions they have and the activities they undertake.

“There has been plenty of time to prepare and materials in support.”

“We expect the super funds to be ready.”

The FAR reporting regime, which applied to the banks from March 2024, sets out new obligations for super funds to identifying and register “accountable” people in their organisation; develop their own internal road map to set out the accountability obligations for key personnel; as well introducing new obligations to defer 40 per cent of variable payments to accountable persons for a minimum of four years.

The banks have been operating under an earlier version of the scheme, the Banking Executive Accountability Regime (BEAR), since 2018, which was introduced in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The FAR will apply to 70 APRA-registered superannuation funds in Australia, and 24 of these, which have assets of more than $30 billion, will be obliged to report additional information, including details of their accountability structure.

The “front door” for super funds to start uploading details of their accountable people officially opens on February 13.

Ms O’Rourke says the two regulators have made a “big effort to make it seamless for people.”

“The last thing you need is for it to be confusing about who to speak to,” she says.

While the portal will be administered by APRA, O’Rourke says it will be staffed by people from both regulators who will have access to the data for their different purposes: APRA for prudential purposes; and ASIC for issues of conduct.

A chance to see how it works

O’Rourke says super funds have been given plenty of notice about what will be required under the new reporting regime and have also had a chance to see how it has worked in the banking sector.

“There has been plenty of support and engagement for the sector (to get ready for the new regime),” she says.

She says the first step for funds is to identify who are the people holding the accountable positions in their organisation.

While this is up to the individual funds, the regulators have provided guidance on which roles should be included, such as directors, the chief executive; and a range of other senior roles including chief financial officer, chief operating office, chief risk officer, chief investment officer, chief technology officer, head of internal audit, head of compliance, and executives in charge of anti-money laundering.

O’Rourke says she does not want to estimate how many people this could involve in an particular super fund, as each fund could have a different number depending on its size and structure.

“There is no set answer (to how many people will have to be deemed to be accountable persons and registered),” she says.

“It is not like for every entity there are 15 or 20 [accountable] people.

“Each entity can choose how many people are on their list. They may well give more than one function to a person.

“We don’t know how many people will be in the total bucket.

“The main thing is that the entity covers the field (of executive responsibility). They can’t leave gaps.

“But they have the flexibility to choose.”

Under the new regime, super funds must develop their own accountability maps of the key executives in their organisation, but only those with assets above $30 billion will have to file these details with the portal. Funds with assets above $30 billion also must provide an accountability statement of the people in accountable roles.

Due skill, care and diligence

The new regime also sets out the requirement for super funds to conduct their business with honesty and integrity and with due skill, care and diligence.

They are also specifically required to deal with the regulators “in an open, constructive and co-operative way” as well as ensuring that their “accountable persons” meet their accountability obligations.

O’Rourke says each regulator will have a different interest in the information, depending on their role.

“APRA has got more of a prudential interest in the information, and we have a conduct interest,” O’Rourke says.

“There will be the single point of contact, but it is behind the scenes where we will have access to it.

“We both have access to it, but our lenses are different.”

O’Rourke says ASIC has not yet taken any action against executives in the banking sector as a result of the introduction of the FAR regime last year.

But she says the accountability maps and details of accountable executives are being used to ascertain the correct point of contact if ASIC has a concern about what is going on in an organisation.

O’Rourke rejects suggestions that the new regime is too onerous for the superannuation sector.

“If you look back at the royal commission, which was the genesis for the extension of the idea of accountability regimes beyond banks to the insurance and superannuation sector, it was a recognition that clear accountability drives good outcomes – prudential outcomes, conduct outcomes and consumer outcomes,” she says.

“That driver applies across all three.

“It is not like there are different goals or outcomes expected across banking, insurance, and superannuation.

“We do think that the benefits of the regime we have seen in terms of clearer accountability will be available (for the super fund sector) in a similar sort of way.”

Honing the support

O’Rourke says ASIC and APRA have been “honing the support and facilitation of the mechanisms” for the new regime, dating back to its application to the banking sector.

“We see it as a reasonably smooth process, once (the super funds) start bringing in their information through that front door which is open on February 13,” she says.

O’Rourke also rejects suggestions that the new reporting regime could deter people from wanting to work in the superannuation sector.

“It is an extension of good practice for identifying accountability in an organization and ensuring that there are consequences if things don’t go as they should, of if there are genuine problems that warrant consequences,” she says.

“We haven’t heard that this is occurring (people being deterred from moving into the superannuation sector because of the new regulations), and we don’t anticipate it.

“These frameworks are working well in the banking sector, and we anticipate they will be effective and helpful not only for the entity but for the system and for ASIC in insurance and super (as well as banking).”

For their part, the super funds are officially welcoming the new regime.

A spokesperson for Australian Retirement Trust says the fund “welcomes the introduction of the Financial Accountability Regime as it aligns with our ongoing commitment to our members to deliver on governance, transparency and accountability expectations”.

 “Our board understands its role in reinforcing and accepting accountability and the FAR will be an integral and enduring part of our governance and risk management frameworks into the future.,” the spokesperson says.

Steve Hill, Group Executive, People and Workplace at Aware Super, says the fund is “on track to be able to meet its obligations as an accountable entity under FAR by the implementation date”.

“The application of FAR to superannuation funds is an important step in terms of clarifying and documenting the accountabilities of directors and executives, formalising how authority is delegated, and enabling clear decision making,” Hill says.

Strong foundations

He says the conversations in the fund around getting ready for FAR have “confirmed that our efforts over the past few years to strengthen our business processes, delegations, frameworks and governance risk and compliance management have established strong foundations for implementing FAR.”

Hill says Aware’s work to prepare for the new regime followed a three year program of work to strengthen the fund’s risk and compliance management, which was finished in 2024.

He says the fund had also benefitted from the learnings from the opening of its London office in 2023, which had to comply from day-one with the similar financial accountability regime which operates in the UK.

“While we have made good progress on FAR to date, we understand that strong governance and prudent risk management require ongoing attention and focus and we believe this is simply part of being a well-run fund,” he says.

Hill says the remuneration obligations under FAR have not required the fund to make significant changes to our existing approaches.

He says that Aware, as a Significant Financial Institution (SFI), is already following APRA’s prudential standard CPS511, which came into effect on July 1, 2023.

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