Commonwealth: Financial Accountability Regime Act 2023 (Cth)

Financial Accountability Regime Act 2023 No. 67, 2023 Compilation No. 2 Compilation date: 21 February 2025 Includes amendments: Act No. 14, 2025 About this compilation This compilation This is a compilation of the Financial Accountability Regime Act 2023 that shows the text of the law as amended and in force on 21 February 2025 (the compilation date). The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the Register for the compiled law. Application, saving and transitional provisions for provisions and amendments If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the Register for the compiled law. Self‑repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents Chapter 1—Introduction Part 1—Preliminary 1 Short title 2 Commencement 3 Objects of this Act 4 Simplified outline of this Act 5 Act binds the Crown 6 Extension to external Territories 7 Extra‑territorial application Part 2—Interpretation 8 Definitions 9 Meaning of accountable entity 10 Meaning of accountable person 11 When a person is not an accountable person 12 Meaning of significant related entity 13 Meaning of constitutionally covered body Chapter 2—Obligations under the Financial Accountability Regime Part 1—Introduction 14 Simplified outline of this Chapter Part 2—Obligations of accountable entities and accountable persons Division 1—Accountable entities 15 Obligations of accountable entities 16 Minister may exempt accountable entities 17 Inconsistency with corresponding foreign laws Division 2—Accountable persons 18 Obligations of accountable persons 19 Inconsistency with corresponding foreign laws Part 3—Accountability obligations 20 The accountability obligations of an accountable entity 21 The accountability obligations of an accountable person 22 Taking reasonable steps Part 4—Key personnel obligations 23 The key personnel obligations of an accountable entity 24 People prohibited from being an accountable person Part 5—Deferred remuneration obligations 25 The deferred remuneration obligations of an accountable entity 26 Meaning of variable remuneration 27 Minimum amount of variable remuneration to be deferred 28 Minimum deferral period for variable remuneration 29 Exemption for small amounts of variable remuneration 30 Exemption for variable remuneration payable for temporary performance Part 6—Notification obligations 31 The notification obligations of an accountable entity 32 Events for which the Regulator must be notified 33 Accountability statements 34 Accountability map Chapter 3—Administration Part 1—Introduction 35 Simplified outline of this Chapter Part 2—The Regulator Division 1—Arrangements for administration 36 Administration of this Act 37 Arrangement for administration 38 Agreement about exercise of powers Division 2—Information sharing 39 Disclosure of information and documents between APRA and ASIC Part 3—Registration and disqualification of accountable persons Division 1—Registration of accountable persons 40 Register of accountable persons 41 Registration of a person as an accountable person Division 2—Disqualification of accountable persons 42 Regulator may disqualify an accountable person 43 Regulator may vary or revoke a disqualification 44 Allowing a person disqualified by the Regulator to act as an accountable person Part 4—Regulatory powers and enforcement Division 1—Investigations 45 Regulator may appoint an investigator 46 Requirement to assist investigator 47 Investigator may require production of books etc. 48 Concealing books, accounts or documents relevant to investigation Division 2—Examinations 49 Notice requiring appearance for examination 50 Conduct of examinations 51 Who may be present at examinations 52 Record of examination 53 Offences Division 3—Evidentiary use of certain material 54 Statements made at an examination—proceedings against examinee 55 Statements made at an examination—other proceedings 56 Weight of evidence under section 55 57 Objection to admission of statements made at examination 58 Copies of, or extracts from, certain books, accounts and documents 59 Admissibility of investigation report 60 Exceptions to admissibility of investigation report 61 Material otherwise admissible Division 4—Requesting information 62 Regulator may request information 63 Failing to give information Division 5—Regulator's power to issue directions Subdivision A—Kinds of directions 64 Direction dealing with non‑compliance 65 Direction to reallocate responsibilities Subdivision B—Non‑compliance with directions 66 Offence provision for non‑compliance with a direction Subdivision C—Secrecy and disclosure provisions relating to directions 67 Regulator may determine that a direction is covered by secrecy provision 68 Secrecy relating to directions 69 Disclosure of publicly available information 70 Disclosure allowed by the Regulator 71 Disclosure for the purpose of seeking review or legal advice 72 Disclosure under the APRA Act 73 Disclosure under the ASIC Act 74 Disclosure in circumstances set out in the Minister rules 75 Disclosure for purpose 76 Exceptions operate independently Subdivision D—Other provisions relating to directions 77 Direction not grounds for denial of obligations 78 Information to the Minister about certain directions 79 Relationship with other laws Division 6—Civil penalties 80 Civil penalty provision for non‑compliance with obligations 81 Ancillary contravention of civil penalty provisions 82 Civil penalty provisions—enforcement 83 Civil penalty provisions—amount of penalty Division 7—Enforceable undertakings 84 Enforceable undertakings Division 8—Injunctions 85 Injunctions Division 9—Miscellaneous 86 Physical elements of offences 87 Contravening an offence provision or a civil penalty provision 88 Self‑incrimination 89 Legal professional privilege 90 Powers of Court relating to non‑compliance with this Act Part 5—Review of decisions 91 Reviewable decisions 92 Notice of decisions and review rights 93 Affected person may request reconsideration of reviewable decision 94 Reconsideration of reviewable decision 95 Review by the Administrative Appeals Tribunal Part 6—Miscellaneous 96 Disclosure for the purpose of seeking review or legal advice 97 Indemnifying accountable entities 98 Causes of action not created 99 Compensation for acquisition of property 100 Conduct of directors, employees and agents 101 Protection from liability—general 102 Protection from liability—directions and secrecy 103 Protection from liability—provisions do not limit each other 104 Minister rules 105 Regulator rules Endnotes Endnote 1—About the endnotes Endnote 2—Abbreviation key Endnote 3—Legislation history Endnote 4—Amendment history An Act to provide for a strengthened accountability framework for financial entities in the banking, insurance and superannuation industries, and for related purposes Chapter 1—Introduction Part 1—Preliminary 1 Short title This Act is the Financial Accountability Regime Act 2023. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provisions Commencement Date/Details 1. The whole of this Act The day after this Act receives the Royal Assent. 15 September 2023 Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act. (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act. 3 Objects of this Act The objects of this Act are: (a) to provide for a strengthened accountability framework for: (i) financial entities in the banking, insurance and superannuation industries; and (ii) persons who hold certain positions, or have certain responsibilities, related to those financial entities; and (b) to confer on APRA and ASIC functions and powers (including information gathering, investigation and enforcement powers) that: (i) relate to obligations under that framework; and (ii) can be performed and exercised in aid of their functions and powers under other laws. 4 Simplified outline of this Act This Act establishes a strengthened accountability framework for financial entities in the banking, insurance and superannuation industries that are regulated by Acts under which APRA is the prudential or principal regulator. These entities are called accountable entities. The framework is intended to ensure that accountable entities take reasonable steps: (a) to conduct their business with honesty and integrity, and with due skill, care and diligence; and (b) to deal with APRA and ASIC in an open, constructive and cooperative way; and (c) to prevent adverse effects on their prudential standing or prudential reputation; and (d) to ensure that their senior executives and other key personnel (called accountable persons) meet those same standards of conduct, and take reasonable steps to ensure compliance with applicable laws; and (e) to ensure that related entities whose business and activities materially and substantially affect the accountable entities (called significant related entities) comply with the framework in the same way as the accountable entities themselves. Note: Other entities that hold Australian financial services licences or Australian credit licences are not covered by the framework in this Act. Accountable entities are subject to a series of obligations that enable oversight and enforcement by APRA and ASIC (together called the Regulator). These are enforced mainly through civil penalties for non‑compliance. Accountable persons are also subject to obligations, which can be enforced by accountable entities through reduction of deferred remuneration, or by the Regulator through disqualification. A range of compliance and enforcement powers are provided for, including by applying the Regulatory Powers (Standard Provisions) Act 2014. 5 Act binds the Crown (1) This Act binds the Crown in each of its capacities. (2) This Act does not make the Crown liable to be prosecuted for an offence. 6 Extension to external Territories This Act extends to every external Territory. 7 Extra‑territorial application This Act extends to acts, omissions, matters and things outside Australia. Note: The expression this Act includes the Regulatory Powers Act as it applies in relation to this Act (see section 8). Part 2—Interpretation 8 Definitions In this Act: accountability map: see subsection 31(2). accountability statement: see subsection 31(2). accountable entity: see section 9. accountable person: see sections 10 and 11. ADI has the same meaning as in the Banking Act 1959. Note: ADI is short for authorised deposit‑taking institution. affected person: see section 91. annual turnover, of an accountable entity during a 12‑month period, has the same meaning as in the Corporations Act 2001. APRA means the Australian Prudential Regulation Authority. APRA staff member has the same meaning as in the Australian Prudential Regulation Authority Act 1998. ASIC means the Australian Securities and Investments Commission. ASIC staff member means a staff member within the meaning of the Australian Securities and Investments Commission Act 2001. Australia, when used in a geographical sense, includes the external Territories. authorised NOHC: (a) of an ADI—means an authorised NOHC (within the meaning of the Banking Act 1959) of the ADI; and (b) of a general insurer—means an authorised NOHC (within the meaning of the Insurance Act 1973) of the general insurer. Note: NOHC is short for non‑operating holding company. benefit derived and detriment avoided has the same meaning as in the Corporations Act 2001. civil penalty order has the same meaning as in the Regulatory Powers Act. civil penalty provision has the same meaning as in the Regulatory Powers Act. connected entity, in relation to an RSE licensee, means a connected entity (within the meaning of the Superannuation Industry (Supervision) Act 1993) of the RSE licensee. constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies. constitutionally covered body: see section 13. decision‑maker for a reviewable decision means: (a) if APRA made the reviewable decision—APRA; or (b) if ASIC made the reviewable decision—ASIC. enhanced notification threshold: see subsection 31(3). financial year, in relation to an accountable entity or significant related entity: (a) if the accountable entity or significant related entity is a company that is registered under the Corporations Act 2001—has the same meaning as in that Act; or (b) if: (i) the accountable entity or significant related entity is not a company that is registered under the Corporations Act 2001; and (ii) the accountable entity or significant related entity is incorporated or registered under another law; and (iii) a definition of financial year applies in relation to that other law; has the same meaning as in that other law; or (c) in any other case—means a period of 12 months starting on 1 July. foreign accountable entity means: (a) a foreign ADI (within the meaning of the Banking Act 1959); or (b) a foreign general insurer (within the meaning of the Insurance Act 1973); or (c) an eligible foreign life insurance company (within the meaning of the Life Insurance Act 1995) that is registered under section 21 of the Life Insurance Act 1995. general insurer has the same meaning as in the Insurance Act 1973. internal decision reviewer: see subsection 94(1). investigator means a person the Regulator appoints under subsection 45(1). lawyer means a duly qualified legal practitioner and, in relation to a person, means such a practitioner acting for the person. life company means a body corporate that is registered under section 21 of the Life Insurance Act 1995. minimum deferral period, for variable remuneration of an accountable person, has the meaning given by subsection 28(1). Minister rules means the rules made under subsection 104(1). officer has the same meaning as in the Corporations Act 2001. private health insurer has the same meaning as in the Private Health Insurance (Prudential Supervision) Act 2015. reconsideration decision means a decision made under subsection 94(2). registered NOHC, of a life company, means a registered NOHC (within the meaning of the Life Insurance Act 1995) of the life company. Note: NOHC is short for non‑operating holding company. Regulator means either APRA or ASIC, but, if the context requires the reference to be particularly to one of those bodies, then Regulator means that body. Note: However, ASIC is to perform functions and exercise powers under this Act only in relation to certain persons: see subsection 36(2). Regulator rules means the rules made under subsection 105(1). Regulatory Powers Act means the Regulatory Powers (Standard Provisions) Act 2014. related: the question whether 2 bodies corporate are related to each other is to be determined for the purposes of this Act in the same way as for the purposes of the Corporations Act 2001. relevant group, of an accountable entity, means the accountable entity and its significant related entities. remuneration, of an accountable person, has a meaning affected by subsection 25(3). reviewable decision: see section 91. RSE licensee means a constitutional corporation, or a body corporate, that: (a) holds an RSE licence granted under section 29D of the Superannuation Industry (Supervision) Act 1993; and (b) is not the trustee of a fund that is an exempt public sector superannuation scheme (within the meaning of that Act). significant related entity has the meaning given by section 12. subsidiary: the question whether a body corporate is a subsidiary of another body corporate is to be determined for the purposes of this Act in the same way as for the purposes of the Corporations Act 2001. this Act includes: (a) the Minister rules; and (b) the Regulator rules; and (c) the Regulatory Powers Act as it applies in relation to this Act. variable remuneration has the meaning given by section 26. 9 Meaning of accountable entity ADIs and authorised NOHCs of ADIs (1) A body corporate is an accountable entity if both of the following apply to the body corporate: (a) it is an ADI or an authorised NOHC of an ADI; (b) it is a constitutionally covered body. Note: For when a body corporate is a constitutionally covered body, see section 13. (2) The ADI or authorised NOHC is an accountable entity from the start of the later of: (a) the day that is 6 months after the commencement of this Act; and (b) the day on which it becomes an ADI or authorised NOHC, as the case may be. Other bodies corporate (3) A body corporate is an accountable entity if both of the following apply to the body corporate: (a) it is: (i) a general insurer; or (ii) an authorised NOHC of a general insurer; or (iii) a life company; or (iv) a registered NOHC of a life company; or (v) a private health insurer; or (vi) an RSE licensee; (b) it is a constitutionally covered body. (4) The body corporate is an accountable entity from the start of the later of: (a) the day that is 18 months after the commencement of this Act; and (b) the day on which it becomes a body corporate covered by the relevant subparagraph of paragraph (3)(a). 10 Meaning of accountable person Accountable persons of accountable entities (1) An individual is an accountable person of an accountable entity if: (a) either of the following applies: (i) in the case of an accountable entity other than an RSE licensee—the person holds a position in the accountable entity or in another body corporate of which the accountable entity is a subsidiary; (ii) in the case of an accountable entity that is an RSE licensee—the person holds a position in the accountable entity or in another body corporate of which the accountable entity is a connected entity; and (b) because of that position, the person has actual or effective senior executive responsibility: (i) for management or control of the accountable entity; or (ii) for management or control of a significant or substantial part or aspect of the operations of the accountable entity or the accountable entity's relevant group. Note 1: For the definitions of connected entity, relevant group and subsidiary, see section 8. Note 2: This section is subject to section 11 (when a person is not an accountable person). Prescribed responsibilities and positions (2) An individual is an accountable person of an accountable entity if the person: (a) holds a position in, or relating to, the accountable entity; and (b) because of that position has a responsibility, relating to the accountable entity, prescribed by the Minister rules for the purposes of this paragraph. (3) If an individual holds a position in an accountable entity that is a position prescribed by the Minister rules for the purposes of this subsection, then: (a) the individual is an accountable person of the accountable entity; and (b) for the purposes of this Act, the responsibilities associated with that position are responsibilities that cause the individual to be an accountable person of the accountable entity. (4) The Minister rules: (a) may prescribe responsibilities relating to accountable entities for the purposes of paragraph (2)(b); and (b) may prescribe positions in accountable entities for the purposes of subsection (3). Note: For example, the Minister rules could prescribe responsibilities relating to accountable entities for the purposes of paragraph (2)(b) by reference to one or more of the following: (a) a level of responsibility; (b) responsibility for a matter; (c) accountable entities of a particular kind. Accountable persons of foreign accountable entities (5) An individual is an accountable person of an accountable entity that is a foreign accountable entity if the person: (a) has a responsibility of a kind mentioned in subsection (1) or (2); or (b) holds a position of a kind mentioned in subsection (3); in relation to a branch of the accountable entity that is operating in Australia. Accountable persons of significant related entities (6) An individual is an accountable person of a significant related entity of an accountable entity if: (a) the person holds a position in the significant related entity; and (b) because of that position, the person has actual or effective senior executive responsibility: (i) for management or control of the accountable entity; or (ii) for management or control of a significant or substantial part or aspect of the operations of the accountable entity or the accountable entity's relevant group. Note: For the definitions of relevant group and significant related entity, see section 8. Alternative tests (7) An individual can be an accountable person of an accountable entity (other than a foreign accountable entity) because of one or more of subsections (1), (2) and (3). An individual can be an accountable person of a foreign accountable entity only because of subsection (5). 11 When a person is not an accountable person When persons are not accountable persons (1) A person is not an accountable person of an accountable entity, or of a significant related entity, if each of the person's responsibilities that would (apart from this subsection) cause the person to be an accountable person of the entity is either: (a) a responsibility excluded under subsection (2) in relation to the entity; or (b) a responsibility excluded under subsection (3) in relation to a class of accountable entities or significant related entities that includes that accountable entity or significant related entity. (2) For the purposes of paragraph (1)(a), the Regulator may, by written notice given to an accountable entity or a significant related entity, exclude specified responsibilities. (3) For the purposes of paragraph (1)(b), the Regulator rules may exclude specified responsibilities relating to: (a) a specified class of accountable entities; or (b) a specified class of significant related entities. Relationship with other provisions (4) This section has effect despite section 10. Notice not a legislative instrument (5) A notice under subsection (2) is not a legislative instrument. 12 Meaning of significant related entity Significant related entities of accountable entities other than RSE licensees (1) Subject to subsection (2), a body corporate is a significant related entity of an accountable entity that is not an RSE licensee if all of the following apply to the body corporate: (a) it is a subsidiary of the accountable entity; (b) it, or its business or activities, has (or is likely to have) an effect on the accountable entity, or the business or activities of the accountable entity, that is material and substantial; (c) it is a constitutionally covered body; (d) it is not an accountable entity itself. Note 1: For the definition of subsidiary, see section 8. Note 2: For when a body corporate is a constitutionally covered body, see section 13. (2) A body corporate is not a significant related entity of an accountable entity (the first accountable entity) if: (a) the body corporate is also a subsidiary of another accountable entity; and (b) that other accountable entity is a subsidiary of the first accountable entity. Example: Company A is a subsidiary of the authorised NOHC of an ADI, and also a subsidiary of the ADI. Both the ADI and the authorised NOHC are accountable entities. Under this subsection: (a) if the business of Company A has a material and substantial effect on both the ADI and the authorised NOHC—Company A would be a significant related entity only in relation to the ADI; but (b) if the business of Company A did not have a material and substantial effect on the ADI—Company A would not be a significant related entity in relation to either the ADI or the authorised NOHC. Significant related entities of accountable entities that are RSE licensees (3) A body corporate is a significant related entity of an accountable entity that is an RSE licensee if all of the following apply to the body corporate: (a) it is a connected entity of the accountable entity; (b) it, or its business or activities, has (or is likely to have) an effect on the accountable entity, or the business or activities of the accountable entity, that is material and substantial; (c) it is a constitutionally covered body; (d) it is not an accountable entity itself. Note: For the definition of connected entity, see section 8. Material and substantial effect (4) For the purposes of paragraphs (1)(b) and (3)(b), in determining whether a body corporate has (or is likely to have) an effect on an accountable entity, or the business or activities of an accountable entity, that is material and substantial, the following matters may be taken into account: (a) the nature of the body corporate's business or activities; (b) the scale of the body corporate's business or activities; (c) the nature and extent of any interdependency between the body corporate and the accountable entity; (d) any organisational, financial or administrative arrangements between the body corporate and the accountable entity; (e) any other relevant matter. 13 Meaning of constitutionally covered body (1) A body corporate is a constitutionally covered body if any of the following apply to the body corporate: (a) it is a constitutional corporation; (b) it carries on the business of banking (within the meaning of paragraph 51(xiii) of the Constitution), other than State banking not extending beyond the limits of the State concerned; (c) it carries on the business of insurance (within the meaning of paragraph 51(xiv) of the Constitution), other than State insurance not extending beyond the limits of the State concerned; (d) it is the trustee of a superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993) the sole or primary purpose of which is the provision of old‑age pensions (within the meaning of paragraph 51(xxiii) of the Constitution). (2) A body corporate is also a constitutionally covered body if: (a) the conduct of the body corporate affects (or is capable of affecting) the activities, functions, relationships or business of another body corporate; and (b) the other body corporate is covered by paragraph (1)(a), (b), (c) or (d). Chapter 2—Obligations under the Financial Accountability Regime Part 1—Introduction 14 Simplified outline of this Chapter Entities of the following kinds are accountable entities: (a) an authorised deposit‑taking institution (ADI); (b) an authorised non‑operating holding company (NOHC) of an ADI; (c) a general insurer; (d) an authorised NOHC of a general insurer; (e) a life company; (f) a registered NOHC of a life company; (g) a private health insurer; (h) an RSE licensee. Note: RSE is short for registrable superannuation entity. An accountable person is primarily someone who has actual or effective senior executive responsibility for management or control of an accountable entity, or of a significant or substantial part or aspect of the operations of the entity or its corporate group. Rules made by the Minister can prescribe other responsibilities and positions that cause a person to be an accountable person. An accountable entity must comply with: (a) accountability obligations under Part 3; and (b) key personnel obligations under Part 4, including to ensure that responsibilities covering all parts of its business are appropriately allocated to accountable persons who are registered with the Regulator and not disqualified; and (c) obligations under Part 5 to defer a prescribed portion of the variable remuneration of its accountable persons to ensure compliance with their obligations; and (d) obligations under Part 6 to notify the Regulator of matters relating to accountable persons and their responsibilities. An accountable entity that fails to comply with any of these obligations is liable to a civil penalty. Accountable persons also have accountability obligations under Part 3. Failure by an accountable person to comply with any of those obligations may lead to reduction of their variable remuneration or disqualification by the Regulator. A foreign accountable entity is subject to obligations only to the extent that it operates a branch of the foreign accountable entity in Australia. Part 2—Obligations of accountable entities and accountable persons Division 1—Accountable entities 15 Obligations of accountable entities (1) An accountable entity must comply with each one of the following: (a) its accountability obligations under Part 3; (b) its key personnel obligations under Part 4; (c) its deferred remuneration obligations under Part 5; (d) its notification obligations under Part 6. Note: Failure to comply with an obligation under this Chapter is a contravention of a civil penalty provision (see section 80). (2) Subsection (1) does not apply to: (a) an accountable entity that: (i) the Minister has exempted under section 16; or (ii) is included in a class of accountable entities that the Minister has exempted under section 16; or (b) a foreign accountable entity, except to the extent that it operates a branch of the foreign accountable entity in Australia. (3) Subsection (1) does not apply to an accountable entity and an obligation to the extent that the accountable entity is not required to comply with the obligation because of subsection 17(2). 16 Minister may exempt accountable entities Exemption of particular accountable entities (1) The Minister may, by notifiable instrument, exempt an accountable entity from compliance with this Chapter. (2) The Minister may only exempt an accountable entity under subsection (1) if the Minister is satisfied that it would be unreasonable for the accountable entity to be required to comply with this Chapter. (3) An exemption under subsection (1) must include a statement that sets out the Minister's reasons for making the exemption. Class exemptions (4) The Minister may, by legislative instrument, exempt a class of accountable entities from compliance with this Chapter. (5) The Minister may only exempt a class of accountable entities under subsection (4) if the Minister is satisfied that it would be unreasonable for the class of accountable entities to be required to comply with this Chapter. 17 Inconsistency with corresponding foreign laws (1) If the Regulator is satisfied that an accountable entity would contravene a law of a foreign country if the accountable entity were to comply with a particular obligation under section 15, the Regulator may: (a) give a written notice specifying that obligation to the accountable entity; and (b) specify in the notice: (i) the extent to which the accountable entity need not comply with that obligation; and (ii) conditions to which the notice is subject. Note: A decision not to specify an obligation, or to specify conditions, is a reviewable decision (see Part 5 of Chapter 3). (2) The accountable entity is not required to comply with that obligation: (a) to the extent compliance would result in the accountable entity contravening that law of a foreign country; or (b) if the notice specifies the extent to which the accountable entity need not comply with that obligation—to the extent so specified; if the conditions (if any) specified in the notice are complied with. (3) A notice under subsection (1) is not a legislative instrument. Division 2—Accountable persons 18 Obligations of accountable persons (1) An accountable person must comply with each of the person's accountability obligations under Part 3 in relation to each of the responsibilities that cause the person to be an accountable person of an accountable entity or a significant related entity. (2) Subsection (1) does not apply to an accountable person of an accountable entity to which section 15 does not apply because of paragraph 15(2)(a). (3) Subsection (1) applies to an accountable person of a foreign accountable entity only in relation to a branch of the accountable entity that is operating in Australia. (4) Subsection (1) does not apply to an accountable person and an obligation to the extent that the accountable person is not required to comply with the obligation because of subsection 19(2). 19 Inconsistency with corresponding foreign laws (1) If the Regulator is satisfied that an accountable person of an accountable entity, or of a significant related entity, would contravene a law of a foreign country if the person were to comply with a particular obligation under section 18, the Regulator may: (a) give a written notice specifying that obligation to the accountable person; and (b) specify in the notice: (i) the extent to which the accountable person need not comply with that obligation; and (ii) conditions to which the notice is subject. Note: A decision not to specify an obligation, or to specify conditions, is a reviewable decision (see Part 5 of Chapter 3). (2) The accountable person is not required to comply with that obligation: (a) to the extent that compliance would result in the accountable person contravening that law of a foreign country; or (b) if the notice specifies the extent to which the accountable person need not comply with that obligation—to the extent so specified; if the conditions (if any) specified in the notice are complied with. (3) The Regulator must give a copy of the notice to the accountable entity or significant related entity. (4) A notice under subsection (1) is not a legislative instrument. Part 3—Accountability obligations 20 The accountability obligations of an accountable entity The accountability obligations of an accountable entity are: (a) to take reasonable steps to conduct its business with honesty and integrity, and with due skill, care and diligence; and (b) to take reasonable steps to deal with the Regulator in an open, constructive and cooperative way; and (c) in conducting its business, to take reasonable steps to prevent matters from arising that would (or would be likely to) adversely affect the accountable entity's prudential standing or prudential reputation; and (d) to take reasonable steps to ensure that each of its accountable persons meets their accountability obligations under section 21; and (e) to take reasonable steps to ensure that each of its significant related entities complies with each of paragraphs (a), (b), (c) and (d) as if the significant related entity were an accountable entity. Note: See also section 22 (taking reasonable steps). 21 The accountability obligations of an accountable person (1) The accountability obligations of an accountable person of an accountable entity, or of a significant related entity of an accountable entity, are to conduct the responsibilities of their position as an accountable person: (a) by acting with honesty and integrity, and with due skill, care and diligence; and (b) by dealing with the Regulator in an open, constructive and cooperative way; and (c) by taking reasonable steps in conducting those responsibilities to prevent matters from arising that would (or would be likely to) adversely affect the prudential standing or prudential reputation of the accountable entity; and (d) by taking reasonable steps in conducting those responsibilities to prevent matters from arising that would (or would be likely to) result in a material contravention by the accountable entity of any of the following: (i) this Act; (ii) the Banking Act 1959; (iii) the credit legislation (within the meaning of the National Consumer Credit Protection Act 2009); (iv) the Financial Sector (Collection of Data) Act 2001; (v) the financial services law (within the meaning of the Corporations Act 2001); (vi) the Insurance Act 1973; (vii) the Life Insurance Act 1995; (viii) the Private Health Insurance (Prudential Supervision) Act 2015; (ix) the Superannuation Industry (Supervision) Act 1993; (x) regulations, instruments, directions or orders made under a law referred to in any of subparagraphs (i) to (ix). Example: Cherie is an accountable person of an ADI and has senior executive responsibility for management of the ADI's financial resources. Cherie must take reasonable steps to ensure that the management of those resources complies with the requirements of laws, instruments, directions and orders referred to in subparagraphs (d)(i) to (x) that apply in relation to financial resource management. Note 1: See also section 22 (taking reasonable steps). Note 2: For protection for whistleblowers, see Part 9.4AAA of the Corporations Act 2001. (2) To the extent that 2 or more accountable persons of an accountable entity or significant related entity have the same responsibility, each of them has the accountability obligations under subsection (1) in relation to that responsibility to the same extent as if it were solely that person's responsibility. Note: Under section 65, the Regulator may direct an accountable entity to reallocate a responsibility of an accountable person. 22 Taking reasonable steps Without limiting what constitutes the taking of reasonable steps in relation to a matter for the purposes of this Part, the taking of reasonable steps in relation to that matter includes: (a) having appropriate governance, control and risk management in relation to that matter; and (b) having safeguards against inappropriate delegations of responsibility in relation to that matter; and (c) having appropriate procedures for identifying and remediating problems that arise or may arise in relation to that matter; and (d) taking appropriate action in response to non‑compliance, or suspected non‑compliance, in relation to that matter. Part 4—Key personnel obligations 23 The key personnel obligations of an accountable entity (1) The key personnel obligations of an accountable entity are: (a) subject to subsections (2) and (3), to ensure that the responsibilities of the accountable persons of the accountable entity and its significant related entities cover: (i) all parts or aspects of the operations of the accountable entity's relevant group; and (ii) each of the responsibilities to which subsection 10(2) applies; and (iii) each of the responsibilities to which subsection 10(3) applies; and (b) to ensure that no accountable person of the accountable entity or any of its significant related entities is prohibited by section 24 from being an accountable person of the accountable entity or significant related entity; and (c) to comply with each direction the Regulator gives to the accountable entity under section 65; and (d) to take reasonable steps to ensure that each of the accountable entity's significant related entities complies with each of paragraphs (b) and (c) as if the significant related entity were an accountable entity. Note: For the definition of relevant group, see section 8. (2) Paragraph (1)(a) does not apply in relation to a responsibility excluded by the Regulator under subsection 11(2) or (3). (3) If the accountable entity is a foreign accountable entity, the accountable entity's obligation under paragraph (1)(a) is taken to be an obligation to ensure that the responsibilities of the accountable entity's accountable persons cover: (a) all parts or aspects of the operations of each branch of the accountable entity operating in Australia; and (b) for each such branch: (i) each of the responsibilities to which subsection 10(2) applies; and (ii) each of the responsibilities to which subsection 10(3) applies. 24 People prohibited from being an accountable person (1) A person is prohibited from being an accountable person of an accountable entity or significant related entity if the person: (a) is not registered in respect of the accountable entity or significant related entity on the register established under section 40; or (b) is disqualified under section 42 from being or acting as an accountable person of the accountable entity or significant related entity. (2) If a person becomes an accountable person of an accountable entity or significant related entity by filling a temporary or unforeseen vacancy, paragraph (1)(a) does not apply to the person in respect of the accountable entity or significant related entity until the person has been an accountable person of the entity for: (a) 90 days; or (b) such other period as is determined under subsection (5) or prescribed by the Regulator rules. Note: One example of a temporary vacancy is when the holder of a position is absent from duty but is expected to return. Another is where a position becomes vacant and there is an intention to fill it, but the new holder has not yet been appointed. (3) If a person becomes an accountable person of an accountable entity by being appointed a director of a body corporate at a general meeting of the body, paragraph (1)(a) does not apply to the person in respect of the accountable entity until the person has been an accountable person of the entity for: (a) 30 days; or (b) such other period as is determined under subsection (5) or prescribed by the Regulator rules. (4) If, because a body corporate first becomes an ADI, an authorised NOHC of an ADI, a general insurer, an authorised NOHC of a general insurer, a life company, a registered NOHC of a life company, a private health insurer or an RSE licensee: (a) that or another body corporate becomes an accountable entity; and (b) a person becomes an accountable person of the accountable entity, or of a significant related entity of the accountable entity; paragraph (1)(a) does not apply to the person in respect of the accountable entity or significant related entity, as the case may be, until the person has been an accountable person of the entity for: (c) 30 days; or (d) such other period as is determined under subsection (5) or prescribed by the Regulator rules. (5) The Regulator may, by written notice given to an accountable entity or significant related entity, determine a period for the purposes of paragraph (2)(b), (3)(b) or (4)(d). (6) If a determination made under subsection (5) is inconsistent with Regulator rules made for the purposes of paragraph (2)(b), (3)(b) or (4)(d), the determination prevails and the Regulator rules, to the extent of the inconsistency, do not have any effect. (7) A determination made under subsection (5) is not a legislative instrument. Part 5—Deferred remuneration obligations 25 The deferred remuneration obligations of an accountable entity (1) The deferred remuneration obligations of an accountable entity are: (a) to ensure that, in relation to the variable remuneration of an accountable person of the accountable entity: (i) the payment of a portion of that variable remuneration is deferred for a period; and (ii) the amount of that portion is at least the amount required under subsection 27(1); and (iii) that period is not shorter than the minimum deferral period (see section 28); and (b) to have a remuneration policy in force that requires that, if the person has failed to comply with one or more of their accountability obligations under section 21, the person's variable remuneration is to be reduced by an amount that is proportionate to the failure; and (c) to ensure that, if the remuneration policy requires the variable remuneration to be reduced because of that failure, the amount of the reduction is not paid or transferred to the person; and (d) to take reasonable steps to ensure that, if variable remuneration may become payable to an accountable person of a significant related entity of the accountable entity, the significant related entity complies with each of paragraphs (a), (b) and (c) as if the significant related entity were an accountable entity. (2) A reduction of variable remuneration: (a) need not be a reduction of variable remuneration relating to a period in which the failure occurred; and (b) may be a reduction to zero. (3) Remuneration, of an accountable person, includes: (a) in relation to an accountable person of an accountable entity—any remuneration that: (i) is an amount paid or payable, or property transferred or transferrable, to the accountable person by a related body corporate of the accountable entity; and (ii) relates wholly or partly to the responsibilities that cause the person to be an accountable person of the accountable entity; or (b) in relation to an accountable person of a significant related entity—any remuneration that: (i) is an amount paid or payable, or property transferred or transferrable, to the accountable person by a related body corporate of the significant related entity; and (ii) relates wholly or partly to the responsibilities that cause the person to be an accountable person of the significant related entity. Note: For when bodies corporate are related, see section 8. 26 Meaning of variable remuneration (1) The variable remuneration of an accountable person of an accountable entity or a significant related entity is: (a) so much (if any) of the accountable person's total remuneration as: (i) is conditional on the achievement of objectives; and (ii) is not remuneration of a kind prescribed by the Regulator rules for the purposes of this subparagraph; and (b) so much (if any) of the accountable person's total remuneration as is remuneration of a kind determined under paragraph (3)(a) or prescribed by the Regulator rules. (2) However, remuneration of a kind determined under paragraph (3)(b) is not variable remuneration of an accountable person of an accountable entity or a significant related entity. (3) The Regulator may, by written notice given to an accountable entity or a significant related entity, determine that: (a) remuneration of a particular kind, of one or more accountable persons, or of a class of accountable persons, of the accountable entity or significant related entity, is variable remuneration; or (b) remuneration of a particular kind, of one or more accountable persons, or of a class of accountable persons, of the accountable entity or significant related entity, is not variable remuneration. Note: A decision under this subsection is a reviewable decision (see Part 5 of Chapter 3). (4) The Regulator must give a copy of a determination it makes under subsection (3) to each person who, when the determination is made, is an accountable person covered by the determination. (5) If: (a) after a determination is made under subsection (3), a person becomes an accountable person of the accountable entity or significant related entity; and (b) the determination covers the person; the accountable entity or significant related entity must give a copy of the determination to the person. (6) A notice under subsection (3) is not a legislative instrument. (7) Regulator rules made for the purposes of paragraph (1)(b), or a determination made for the purposes of paragraph (3)(a), may also identify the day, or a way of working out the day, on which the minimum deferral period for the variable remuneration starts. 27 Minimum amount of variable remuneration to be deferred (1) The amount of an accountable person's variable remuneration that is required to be deferred under subparagraph 25(1)(a)(ii) is 40% of the accountable person's variable remuneration for the financial year in which the minimum deferral period for the variable remuneration starts. Note 1: For when the minimum deferral period starts, see section 28. Note 2: For the applicable financial year, see subsection (7) of this section. Working out value of variable remuneration (2) For the purposes of this section, the value of variable remuneration of an accountable person that has been deferred is taken to be: (a) if a written notice given under subsection (3) determines a way to work out that value—the value worked out in that way; or (b) if paragraph (a) does not apply and the Regulator rules prescribe a way to work out that value—the value worked out in that way; or (c) if paragraphs (a) and (b) do not apply—what would have been the value of that remuneration if it had instead been paid or transferred to the person at the start of the minimum deferral period for the variable remuneration. (3) The Regulator may, by written notice given to an accountable entity or a significant related entity, determine the way to work out, for the purposes of this section, the value of variable remuneration of accountable persons of the accountable entity or significant related entity. Note: A decision under this subsection is a reviewable decision (see Part 5 of Chapter 3). (4) The Regulator must give a copy of a determination it makes under subsection (3) to each person who, when the determination is made, is an accountable person covered by the determination. (5) If: (a) after a determination is made under subsection (3), a person becomes an accountable person of the accountable entity or significant related entity; and (b) the determination covers the person; the accountable entity or significant related entity must give a copy of the determination to the person. Notice not a legislative instrument (6) A notice under subsection (3) is not a legislative instrument. Financial year (7) In determining an amount of an accountable person's variable remuneration for the purposes of this section, use the financial year of the accountable entity or significant related entity of which the person is an accountable person. Note: See section 8 for the definition of financial year. 28 Minimum deferral period for variable remuneration (1) The minimum deferral period for the variable remuneration of an accountable person of an accountable entity or a significant related entity is the period: (a) starting on the day determined under subsection (2) or (3); and (b) ending on the day determined under subsection (4). When the deferral period starts (2) The minimum deferral period for the variable remuneration of an accountable person starts (subject to subsection (3)) on the later of the following days: (a) the day after the day on which the decision was first made that the person's total remuneration would be wholly or partly conditional on the achievement of objectives; (b) if the achievement of those objectives (as first decided) is to be measured by reference to a particular period—the day that period starts. (3) However, if: (a) the variable remuneration is remuneration of a kind determined under paragraph 26(3)(a), or prescribed by the Regulator rules for the purposes of paragraph 26(1)(b); and (b) the determination provides, or the Regulator rules provide, for when the minimum deferral period for the variable remuneration starts; then the minimum deferral period starts on the day so provided. When the minimum deferral period ends (4) The minimum deferral period for the variable remuneration of an accountable person ends on the earliest day worked out under an applicable item of the following table. End of minimum deferral period Column 1 Column 2 Item If … the period ends on … 1 it is the last day of the period of 4 years after the start of the minimum deferral period (a) that last day, unless paragraph (b) applies; or (b) if, on the day determined under paragraph (a), the accountable entity or significant related entity considers that the accountable person is likely to have failed to comply with one or more of their accountability obligations under section 21—the later day on which the entity determines whether or not the person has failed to comply. 2 the accountable person ceases to be an accountable person because of the person's death, serious incapacity, serious disability or serious illness (a) the day on which the person so ceases, unless paragraph (b) applies; or (b) if, on the day determined under paragraph (a), the accountable entity or significant related entity is not yet satisfied on reasonable grounds that the person has complied with the person's accountability obligations under section 21: (i) the day on which the entity is so satisfied (whether the compliance occurred on or before the entity being so satisfied); or (ii) if the day mentioned in subparagraph (i) does not occur—the day determined under item 1. 3 a circumstance determined under subsection (5), or prescribed by the Regulator rules for the purposes of this item, exists or occurs in relation to the accountable person (a) the day on which the circumstance occurs or begins to exist, unless paragraph (b) applies; or (b) if, on the day determined under paragraph (a), the accountable entity or significant related entity is not yet satisfied on reasonable grounds that the person has complied with the person's accountability obligations under section 21: (i) the day on which the entity is so satisfied (whether the compliance occurred on or before the entity being so satisfied); or (ii) if the day mentioned in subparagraph (i) does not occur—the day determined under item 1. Note: In relation to item 1, if the accountable entity or significant related entity determines that the person has failed to comply, the remuneration policy must require the amount of variable remuneration paid or transferred to the person to be reduced by an amount that is proportionate to the failure: see paragraph 25(1)(b). (5) The Regulator may, by written notice given to an accountable entity, determine circumstances for the purposes of item 3 of the table in subsection (4) in relation to either or both of the following: (a) the accountable entity; (b) one or more significant related entities of the accountable entity. Notice not a legislative instrument (6) A notice under subsection (5) is not a legislative instrument. 29 Exemption for small amounts of variable remuneration (1) Paragraph 25(1)(a) does not apply in relation to the variable remuneration of an accountable person for a financial year if the amount of the person's variable remuneration that is required, or would apart from this section be required, under subparagraph 25(1)(a)(ii) to be deferred for that financial year is less than: (a) the amount (if any) prescribed by the Minister rules; or (b) if no amount is prescribed for the purposes of paragraph (a)—$50,000. Financial year (2) For the purposes of subsection (1), use the financial year of the accountable entity or significant related entity of which the person is an accountable person. Note: See section 8 for the definition of financial year. 30 Exemption for variable remuneration payable for temporary performance (1) This section applies if: (a) a person becomes an accountable person of an accountable entity or a significant related entity by filling a temporary or unforeseen vacancy; and (b) the person is not registered under Division 1 of Part 3 of Chapter 3. (2) Paragraph 25(1)(a) does not apply in relation to the variable remuneration of the accountable person for the period during which, because of subsection 24(2), the person is not prohibited from being an accountable person of the accountable entity or significant related entity. Part 6—Notification obligations 31 The notification obligations of an accountable entity Core notification obligations (1) The notification obligations of an accountable entity are: (a) to notify the Regulator of an event mentioned in section 32: (i) within the period, after the event, provided under subsection (6) of this section; and (ii) in accordance with the requirements under subsection (7) of this section; and (b) to take reasonable steps to ensure that each of its significant related entities complies with paragraph (a) as if the significant related entity were an accountable entity. Enhanced notification obligations (2) In addition to subsection (1), if the accountable entity meets the enhanced notification threshold under subsection (3), then the notification obligations of the accountable entity are: (a) to give to the Regulator a document complying with section 33 (an accountability statement) for each of its accountable persons; and (b) to ensure that the Regulator is notified of any material change to the information contained in the accountability statement for each of its accountable persons: (i) within the period, after the change, provided under subsection (6) of this section; and (ii) in accordance with the requirements under subsection (7) of this section; and (c) to give to the Regulator a document complying with section 34 (an accountability map) within the period, after the body corporate starts being an accountable entity in accordance with subsection 9(2) or (4), provided under subsection (6) of this section; and (d) to ensure that the Regulator is notified of any material change to the information contained in the accountability map: (i) within the period, after the change, provided under subsection (6) of this section; and (ii) in accordance with the requirements under subsection (7) of this section; and (e) to take reasonable steps to ensure that each of its significant related entities complies with each of paragraphs (a) and (b) as if the significant related entity were an accountable entity. Enhanced notification threshold (3) For the purposes of subsection (2), the Minister rules may set out how to determine when an accountable entity meets the enhanced notification threshold. (4) Without limiting subsection (3), the Minister rules may do either or both of the following: (a) specify a method for working out the enhanced notification threshold; (b) specify different methods for working out the enhanced notification threshold for different circumstances. Incorporation by reference (5) Despite subsection 14(2) of the Legislation Act 2003, Minister rules made for the purposes of subsection (3) may provide for a matter by applying, adopting or incorporating any matter contained in an instrument or other writing, as in force or existing from time to time, if the instrument or other writing is published on a website maintained by the Regulator. Period for compliance (6) For the purposes of subparagraphs (1)(a)(i) and (2)(b)(i) and (d)(i) and paragraph (2)(c), the period is: (a) 30 days; or (b) such other period (if any) prescribed by the Regulator rules. Requirements for notice (7) For the purposes of subparagraphs (1)(a)(ii) and (2)(b)(ii) and (d)(ii), the notice must: (a) be in the form approved in writing by the Regulator; and (b) contain the information that the form requires. 32 Events for which the Regulator must be notified For the purposes of paragraph 31(1)(a), the following events must be notified to the Regulator by an accountable entity: (a) a person ceases to be an accountable person of the accountable entity or of a significant related entity of the accountable entity; (b) an accountable person of the accountable entity, or of a significant related entity of the accountable entity, is dismissed or suspended because the person has failed to comply with one or more of the person's accountability obligations under section 21; (c) the variable remuneration of an accountable person of the accountable entity, or of a significant related entity of the accountable entity, is reduced because the person has failed to comply with one or more of the person's accountability obligations under section 21; (d) the accountable entity has reasonable grounds to believe that: (i) the accountable entity has failed to comply with one or more of its accountability obligations under section 20 or of its key personnel obligations under section 23; or (ii) an accountable person of the accountable entity, or of a significant related entity of the accountable entity, has failed to comply with one or more of the person's accountability obligations under section 21; (e) a material change occurs to information that relates to an accountable person of the accountable entity, or of a significant related entity of the accountable entity, and is contained in the register established under section 40. 33 Accountability statements For the purposes of paragraph 31(2)(a), an accountability statement for an accountable person of an accountable entity, or of a significant related entity, must: (a) contain a comprehensive statement of: (i) the part or aspect of the operations of the accountable entity, or of the significant related entity, for which the accountable person has actual or effective responsibility for management or control; and (ii) the responsibilities of the accountable person, including any responsibilities to which paragraph 23(1)(a) or subsection 23(3) applies, as the case requires; and (iii) the matters (if any) prescribed by the Regulator rules; and (b) include a statement by the accountable person declaring that: (i) the content of the accountability statement is accurat