Would you work for a super fund if your salary was at penalty risk?
The Government’s proposed extension of the Bank Executive Accountability Regime (BEAR) to the superannuation industry may make it difficult for superannuation funds to attract the right talent, according to major industry body the Association of Superannuation Funds of Australia (ASFA).
The Government is proposing to extend the BEAR regime beyond banks via the Financial Accountability Regime (FAR), but ASFA has warned that it may have “a significant impact on the ability of Australian Prudential and Regulation Authority (APRA)-regulated entities to attract talent”.
“This will include talent from entities that sit outside the regulatory remit of APRA, as well as global talent that may find the possible imposition of penalties, as well as the restrictions around the awarding of remuneration, as reasons not to take a role within the Australian financial services sector,” it said.
In a submission responding to a Treasury discussion paper, ASFA noted that the penalties proposed by the FAR regime were not dependent on an individual’s remuneration and suggested lower-paid workers in particular might be dissuaded from joining the industry.
“The proposed penalties are not dependent on an individual’s remuneration,” it said.
“Perhaps for higher earning accountable persons, the penalties might not be such a deterrent from undertaking a position. For other roles that do not have a high salary, the possible imposition of individual penalties is likely to strongly deter individuals from taking those roles,” it said.
“A clear decision procedure to determine when a penalty will be imposed, and the amount of penalty, will help identify the principles in which the regulators will apply in determining a penalty. This will allow entities to understand exactly what compliance risks to look out for.”
“The imposition of individual penalties could have consequences on the remuneration expectations of accountable persons and could, by extension, be a cost to members. Individual penalties could also have the consequence of stifling innovation and reducing the desire of individuals to drive taking measured business risks. Many might not want to ‘rock the boat’ for fear that an innovation may not be as effective as imagined and will therefore result in the imposition of individual penalties,” it said.
“In the first instance, ASFA recommends penalties be applied to entities for FAR breaches rather than individuals. Individual penalties could be considered at a later stage if the FAR is not having the impact that was intended. There is no question that registrable superannuation entity (RSE) licensees should, and are, accountable to their members. The comprehensive duties RSE licensees have to their members is already enshrined in law and regulation and the FAR provisions applying to RSE licensees should be considered in this context.”
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
