Delays to FAR implementation date likely, but in the meantime…

RELATED KNOWLEDGE

• One step closer to FAR: more details known of the Financial Accountability Regime Bill

The Financial Accountability Regime Bill 2021 (FAR Bill) will not pass into legislation this year; instead, it has been referred to the Senate Economics Legislation Committee, with a report due by 15 February 2022.

The Senate Committee will consider six topics largely related to the administration of the regime, including:

• whether the Minister should have a broad power to provide exemptions to the Financial Accountability Regime (and if it is, whether guidance can be provided on the exercise of that power, noting the potential for a broad, unconstrained exemptions power to undermine the regime);
• if the arrangement entered into between APRA and ASIC to jointly administer the regime should be tabled in each of the Houses of Parliament, and the details of that arrangement be left to delegated legislation;
• the inclusion of no-invalidity clauses in subclauses 36(2), 37(5), and 38(4). A "no-invalidity" clause says an  act  done  or  decision  made  in  breach  of  a  particular  statutory  requirement  or  other  administrative  law  norm  is not invalid.  For example, under subclause 36(2) ASIC is only to perform functions and powers in relation to accountable entities that hold a financial services license, significant related entities or accountable persons. However, ASIC's failure to do so does not invalidate the performance or exercise of the function or power by ASIC. Subclauses 37(5) and 38(4) are similar. The referral paper notes that there  are  significant  scrutiny  concerns  with  no-invalidity  clauses,  as  these  clauses may limit the practical efficacy of judicial review to provide a remedy for legal errors.

What happens next will depend heavily upon the Committee's report. If the report makes no recommendations for amendments, the path is clear for the Federal Parliament to pass the Bill in the Autumn sittings, which, given the upcoming Federal election, will last until early April at the latest. Any amendments proposed and not accepted by the Government and the Bill could be further held up, or even not be passed in the short timeframe. 

The deferral of the passage of the FAR Bill to 2022 results in uncertainty as to when the new obligations will come into force. Under the current proposed legislation:

• For authorised deposit holding institutions, the obligations will come into force on either 1 July 2022 or 6 months after the Bill is passed, whichever comes later.
• For registerable superannuation entities and insurers, the obligations will come into force on either 1 July 2023 or 18 months after the Bill is passed, whichever comes later.

In the current circumstances, it appears that commencement will likely occur sometime after July 2022 for ADIs, six months after the legislation is passed. For both RSE licensees and insurers, commencement will be sometime after July 2023, 18 months after the FAR Bill is passed.