Home / Life Insurance / Accountability rules may hit recruitment: FSC
24 February 2020
The Financial Services Council (FSC) says civil penalties proposed for individuals under an extension of the Banking Executive Accountability Regime (BEAR) may hit industry recruitment.
Designated “accountable persons” could face maximum penalties of $1.05 million for breaching obligations under proposals for the new Financial Accountability Regime (FAR).
The FSC says that while entities would be prohibited from paying the cost of insuring accountable people, it’s unclear whether individuals would be able to gain cover for civil penalties under the regime.
It proposes Treasury work closely with the insurance industry to ensure penalties are framed in a way to allow for cover, to prevent unintended consequences.
“We are concerned that the individual civil penalty regime may operate as a disincentive to recruitment and adversely impact on talent retention strategies in the financial services sector,” it says in a submission to a Treasury consultation paper.
The FSC also says the impact of the regime on foreign firms is unclear, and it should not sweep up overseas-based executives.
Some 80% of Australian life insurers are foreign-owned and it is common for international firms to have various reporting lines to managers based overseas.
“It seems to us that these executives would be subject to regulation in a home jurisdiction, and there are practical difficulties in seeking to apply the provisions of the FAR” it says.
The submission questions how the new regime will interact with other laws and statutory rules, including product design and distribution obligations.
“The FAR regime has the potential to be complex and to compound complexity in an already crowded regulatory landscape,” the FSC says.
The Federal Government is expected to released draft legislation for further consultation before introducing a Bill into Parliament in the spring session.