Consultation for the Financial Accountability Regime laws close today after only four weeks and lawyers are arguing that the pace of change is too fast, that the interpretation is too broad and the consequences not well understood by the sector.
The planned legislation is a significant broadening of laws that already exist for big banks but will now expose middle management in all banks, superannuation funds, general insurance companies, health insurance and credit unions.
Executives held accountable under the laws will include anyone who has full responsibility for a financial product as well as the heads of human resources and information technology.
The broadening of the laws is in response to the revelations of the Banking Royal Commission.
Gadens director Liam Hennessy said the broadening of the laws was inevitable but that they will have far-reaching consequences including the potential to “flip’’ the presumption of innocence in some cases.
“It demands executives and directors deal in a co-operative way with regulators and act with integrity without defining what some of those terms mean. Does an executive’s duty to cooperate cut across their right to silence? It’s very fuzzy law, at least at this stage,” Hennessy said.
“It will ultimately be up to the Administrative Appeals Tribunal to determine after the regulators’ decisions are appealed there.
“We have these very broad interpretational laws with severe personal consequences, including fines and disqualification, in the hands of regulators who are very hawkish at the moment. Arguably, that’s not a situation in which Australia has ever been in before.”
“People are understandably focused on the fines but what concerns me is the regulator’s right to disqualify executives or veto their appointments in the first place based on their interpretation of broad terms like honesty or integrity, which will may have a significant career impact.’’
A further consequence is that in some cases 40 per cent of an executive’s variable remuneration, such as bonuses, will be deferred for four years “as hostage against good behaviour’’.
That could lead to the base pay of executives increasing.
Corporations could also face fines of $10 million, or three times benefit of the contravention or 10 per cent of the annual turnover of the body corporate.Jump to next article