House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

Chapter 1 - Financial Regulator Assessment Authority

Outline of chapter

1.1 The Financial Regulator Assessment Authority Bill 2021 gives effect to recommendations 6.13 and 6.14 of the Financial Services Royal Commission, by creating a new authority to assess the effectiveness and capability of each of APRA and ASIC. This authority is known as the Financial Regulator Assessment Authority.

1.2 The Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 makes amendments consequential to the enactment of the Financial Regulator Assessment Authority Bill 2021.

Context of the measure

1.3 On 4 February 2019, the Government released its response to the Financial Services Royal Commission Final Report entitled Restoring trust in Australia's financial system. The Government's response committed to taking action on all the recommendations of the Financial Services Royal Commission, and made additional commitments to address the issues identified by Commissioner Hayne.

1.4 Recommendation 6.13 is to subject APRA and ASIC to at least quadrennial capability reviews. Recommendation 6.14 is to establish a new authority to assess the effectiveness and capability of each regulator.

1.5 The Financial Services Royal Commission highlighted that while APRA and ASIC operate within complex accountability frameworks, the regulators' effectiveness in delivering on their mandates is not subject to consistent and independent expert review over time.

1.6 In its response, the Government agreed to create an independently-chaired body to regularly review and report on the performance of APRA and ASIC.

1.7 The Financial Regulator Assessment Authority Bill 2021 creates a statutorily independent Authority consisting of three appointed part-time members (including the Chair) and the Secretary of the Department of the Treasury (or a nominated SES employee in the Treasury) as an ex-officio member. When it is established, the Authority will be supported by a secretariat staffed by the Treasury.

1.8 APRA and ASIC are independent regulators, responsible to the Parliament. This independence is critical to their ability to fulfil their mandates, and for them to have the confidence of the consumers who rely on them. Regulator independence is also important for maintaining the confidence of the market, including in the credibility of the regulators. Such independence is also valued highly by overseas regulators, as well as by bodies such as the International Monetary Fund.

1.9 So that the regulators' operational independence is not unreasonably impacted, the Government's response clarified that the new authority will not have the ability to direct, make, assess or comment on specific cases of the regulators' enforcement actions, regulatory decisions, complaints and like matters.

1.10 As is also appropriate, there are other existing bodies (such as ombudsmen, courts and tribunals) in place to investigate complaints about individual matters or offer avenues of appeal from individual decisions.

Relationship with other oversight and assessment mechanisms

1.11 Both APRA and ASIC are already subject to an array of external assessment, review and oversight mechanisms, including:

•

scrutiny by parliamentary committees;

•

Ministerial oversight including Ministerial direction in particular respects;

•

the requirement to report annually against the Government's Regulator Performance Framework;

•

the public governance framework established by the Public Governance, Performance and Accountability Act 2013, which includes requirements such as the publication of annual reports containing statements of performance;

•

audits of annual financial accounts and ad hoc performance audits by the Australian National Audit Office; and

•

the International Monetary Fund's Financial Sector Assessment Program.

1.12 While both regulators are accountable to the Parliament, the Financial Services Royal Commission noted that Parliamentary committees, including Senate Estimates, have some limitations in assessing the effectiveness of the regulators (for example, the fields of expertise required to assess the regulators).

1.13 Both agencies report extensively on their activities, but these reports are not necessarily subject to rigorous and consistent external analysis. Performance audits by the Australian National Audit Office are conducted on an ad hoc basis.

1.14 The International Monetary Fund's Financial Sector Assessment Program reviews the regulators on a five yearly basis, with a focus on matters related to the resilience and systemic risks of the financial sector.

1.15 While regulators are also subject to the Public Governance, Performance and Accountability Act 2013, this does not require the measures of effectiveness that are included in the corporate plan to be assessed by an external third party.

1.16 The Authority's activities are designed to complement and augment the existing external accountability mechanisms that apply to the regulators, not to duplicate them. Its reports would inform and improve the performance of other accountability mechanisms, such as Parliamentary committees, and would also allow for comparison of regulator performance against their domestic and international peers where practicable.

Summary of new law

1.17 There are three key components in the Financial Regulator Assessment Authority Bill 2021.

1.18 First, it establishes the Authority and provides for its functions and powers. In particular, the Authority's functions are to assess and report on the effectiveness and capability of APRA and ASIC. APRA and ASIC are required to cooperate with the Authority to enable the Authority to perform its functions and exercise its powers. This cooperation includes providing information and documents requested by the Authority.

1.19 Second, it sets out how members and staff members of the Authority are appointed or made available, and how the Authority makes decisions (including delegations).

1.20 Third, to safeguard information that APRA and ASIC provide to the Authority, it prohibits the unauthorised use or disclosure of protected information provided to the Authority (contravention of the prohibition is a criminal offence).

Detailed explanation of new law

Establishment of the Authority

1.21 The object of the Financial Regulator Assessment Authority Bill 2021 is to provide for the independent assessment of the effectiveness and capability of APRA and ASIC [Clause 3 of the Financial Regulator Assessment Authority Bill 2021]

1.22 To this end, the Financial Regulator Assessment Authority Bill 2021 establishes the Authority. The Authority has four members. Three of the members are appointed members, which include the Chair and two other members. A fourth member is the Departmental member, which will be the Secretary of the Department or a nominated SES employee in the Department. The Department referred to in this Chapter is the Department of the Treasury (see item 1 of the table in section 19A(1) of the Acts Interpretation Act 1901). [Clauses 9 and 10 of the Financial Regulator Assessment Authority Bill 2021]

1.23 The appointed members are appointed by the Minister under Division 3 of Part 3 of the Financial Regulator Assessment Authority Bill 2021. The Minister referred to in this explanatory memorandum is any Treasury portfolio Minister (see item 1 of the table in section 19(1) of the Acts Interpretation Act 1901). The identity of the Departmental member is determined by Division 2 of Part 3 of the Financial Regulator Assessment Authority Bill 2021. The Authority will be independent of the Government. Staff are made available to the Authority under Part 3 of the Financial Regulator Assessment Authority Bill 2021.

1.24 Having a Departmental member of the Authority ensures that the advice provided to the Minister by either the Authority or the Department is not duplicative. The Authority will retain strong statutory independence in the preparation and content of its reports and reviews.

1.25 The Authority will be treated as part of the Department for the purposes of the Public Governance, Performance and Accountability Act 2013. This means that members of the Authority are officials of the Department for the purposes of the accountability obligations under that Act, including, for example, the general duties of an official in that Act (see sections 25 to 29 of that Act). Furthermore, an annual report prepared by the Secretary of the Department will be required to cover the Authority's activities (see section 46 of that Act). Public resources expended for the purposes of the Authority will also be used and managed by the Department, through the Secretary as the accountable authority. [Clause 11 of the Financial Regulator Assessment Authority Bill 2021]

Functions and powers of the Authority

1.26 The Authority's key functions are:

•

every two years, to assess and report to the Minister on APRA's effectiveness and capability and on ASIC's effectiveness and capability; and

•

on an ad hoc basis when requested by the Minister, to report to the Minister on any matter relating to either or both of APRA's effectiveness and capability and ASIC's effectiveness and capability.

[Clauses 12 to 14 of the Financial Regulator Assessment Authority Bill 2021]

1.27 The Authority is not permitted to undertake assessments and reviews other than biennially or at the request of the Minister.

1.28 The biennial assessments will consider APRA's or ASIC's effectiveness and capability. The level of detail that such an assessment report will cover for any particular aspect of APRA's or ASIC's effectiveness and capability may vary depending on the result of the Authority's assessment of that aspect. The Minister may request that the Authority consider, or not consider, particular matters when undertaking an assessment of effectiveness and capability. [Clause 13 of the Financial Regulator Assessment Authority Bill 2021]

1.29 Ad hoc assessments will only consider particular matters relating to either or both regulators' effectiveness and capability, being determined by the Minister.

Matters not within the Authority's functions

1.30 The regulators are independent entities responsible to the Parliament, they are not accountable to the Authority. Accordingly, the Authority does not have the power to direct the regulators to implement any recommendations it makes.

1.31 Further, the Authority's functions do not include assessing or reporting on only a single case. [Clause 12(2) of the Financial Regulator Assessment Authority Bill 2021]

1.32 A single case could involve the single performance of a function or the single exercise of a power by a regulator, or the performance of multiple functions and/or exercise of multiple powers by a regulator as part of an individual regulatory action (such as the use of multiple enforcement powers in a single compliance matter, or the issuance of multiple instruments to implement a new prudential standard).

1.33 The Authority is not permitted to assess and prepare a report about only the effectiveness of one particular regulatory action undertaken by APRA or ASIC. This safeguards the independence of the regulators and ensures that the functions of other government bodies responsible for investigating complaints about individual matters (such as the Ombudsman) are not duplicated by the Authority. The Authority's focus is on each regulator's effectiveness at a high level-that is, how well the regulator is delivering on its mandate.

1.34 While the Authority will be responsible for reporting to the Minister on the effectiveness and capability of the regulators, the Department remains responsible for advising the Minister on the regulators' funding and broader financial system policy settings.

Independence of the Authority

1.35 The Authority is independent in the performance of its functions and exercise of its powers. In particular, it is not subject to directions by anyone, including the Minister, in relation to how a particular assessment is undertaken. It has full discretion in performing its functions and exercising its powers. [Clause 19 of the Financial Regulator Assessment Authority Bill 2021]

1.36 The Authority remains subject to the Financial Regulator Assessment Authority Bill 2021, which, for example, allows the Minister to set terms of reference for ad hoc reports the Minister requests from the Authority about a regulator (under clause 14(2)), and for the Minister to request that the Authority consider, or not consider, one or more matters when making its assessments of effectiveness and capability (clause 13(2)).

1.37 The Authority, as is usual, is also subject to other laws of the Commonwealth. For example, the Secretary of the Department, as accountable authority for the Authority, has certain limited powers of direction and instruction under the Public Governance, Performance and Accountability Act 2013. Such powers will not prevent the Authority from independently carrying out its functions.

Timing of assessments and capability reviews and relationship with other reviews

1.38 The Authority is required to undertake assessments of the effectiveness and capability of each of APRA and ASIC once every two financial years, beginning on 1 July 2021. [Clause 13(1) of the Financial Regulator Assessment Authority Bill 2021]

1.39 In assessing and reporting on APRA's and ASIC's effectiveness and capability the Authority may take into account an assessment or review undertaken by another person. [Clause 15 of the Financial Regulator Assessment Authority Bill 2021]

1.40 For example, the International Monetary Fund regularly assesses APRA (and other bodies) under the Financial Sector Assessment Program. Enabling the Authority to take other assessments into account in preparing its reports will avoid duplicating other external assessments of APRA or ASIC.

Terms of reference for ad hoc assessment reports

1.41 Where the Minister requests the Authority to undertake an ad hoc report on a matter relating to the effectiveness and capability of each regulator, the request may include terms of reference. [Clause 14(2) of the Financial Regulator Assessment Authority Bill 2021]

1.42 These terms of reference may, for example, cover:

•

the matters to be considered by the report;

•

a requirement for the report to include recommendations; and

•

the timeframe in which the report is to be provided to the Minister.

1.43 For the avoidance of doubt, a Ministerial request made in writing is declared not to be a legislative instrument. [Clause 14(4) of the Financial Regulator Assessment Authority Bill 2021]

1.44 This is not a substantive exception to the Legislation Act, as the request would not otherwise be a legislative instrument for the purposes of that Act. Instead, the provision is included to assist readers of the legislation.

Cooperation with the Authority in performing its functions

1.45 APRA and ASIC (including their members and staff), are required to cooperate with the Authority (including its members and staff) to the extent reasonably necessary to enable the Authority to perform its functions and exercise its powers. [Clause 20 of the Financial Regulator Assessment Authority Bill 2021]

1.46 Without limiting the general obligation, this cooperation includes each of the following information-sharing obligations:

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giving the Authority any requested information;

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producing any requested document in APRA's or ASIC's possession; and

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answering the Authority's questions.

[Clauses 20 of the Financial Regulator Assessment Authority Bill 2021]

1.47 Whether a request by the Authority is 'reasonably necessary' to enable the performance of its functions and exercise of its powers will need to be determined on a case-by-case basis.

1.48 Legal professional privilege does not excuse the requirement for a regulator (or its members or staff) to provide information, produce a document or answer a question. However, providing the information, document or answer does not represent a waiver of a right to claim legal professional privilege. This information is also protected by the information management provisions in Part 4 of the Financial Regulator Assessment Authority Bill 2021 (discussed below). [Clause 21 of the Financial Regulator Assessment Authority Bill 2021]

1.49 Persons required to provide information, produce documents or answer questions will be given reasonable time before being required to do so. [Clauses 20 of the Financial Regulator Assessment Authority Bill 2021]

1.50 The Authority may delegate its powers to request information, documents or answers to questions from APRA and ASIC. These powers may be delegated to a member, or to a staff member that is at least Executive Level 2. [Clause 49 of the Financial Regulator Assessment Authority Bill 2021]

1.51 The information sharing required of APRA and ASIC as part of their cooperation obligations differ from other bodies' more formal coercive powers to issue notices to require a person to provide information, produce documents or answer questions. In particular, there is not a criminal offence provision associated with the statutory obligations to cooperate. [Clause 20 of the Financial Regulator Assessment Authority Bill 2021]

Processes to be followed in relation to reports and reviews

1.52 Before giving an assessment and capability report on APRA or ASIC to the Minister, the Authority is required to first give a copy of the proposed report or review to the relevant regulator so that they may comment on it. The Authority may delegate this to a member or a staff member. [Clauses 16(1) and 49 of the Financial Regulator Assessment Authority Bill 2021]

1.53 The Authority is required to consider any comments received from APRA or ASIC in finalising the report. [Clause 16(2) of the Financial Regulator Assessment Authority Bill 2021]

1.54 The formal consultation process envisaged by these provisions is not intended to prevent the Authority from consulting with APRA and ASIC throughout the process of preparing an assessment report review.

1.55 The Minister is required to table a copy of a biennial report assessing a regulator's effectiveness and capability in each House of the Parliament. Ad hoc reports may also be tabled in Parliament. [Clause 17 of the Financial Regulator Assessment Authority Bill 2021]

1.56 The Authority is not permitted to publish its reports unless the report has been tabled in a House of the Parliament, or has been published by the Minister. [Clause 16(4) of the Financial Regulator Assessment Authority Bill 2021]

1.57 The Authority is required to give a final report to the regulator or regulators to which the report relates. The Authority may delegate this to a member or a staff member. [Clauses 16(3) and 49 of the Financial Regulator Assessment Authority Bill 2021]

Other functions and powers of the Authority

1.58 The Authority may also have functions conferred by other provisions of the Financial Regulator Assessment Authority Bill 2021 or of another law of the Commonwealth, and has any other function incidental or conducive to the performance of any of its functions. [Clause 12 of the Financial Regulator Assessment Authority Bill 2021]

1.59 The Authority has the power to do all things necessary or convenient to be done in connection with the performance of its functions. [Clause 18 of the Financial Regulator Assessment Authority Bill 2021]

1.60 It is intended that public resources expended in relation to the Authority will be committed by the Secretary of the Department (or the Secretary's delegate) under Division 5 of Part 3 of the Financial Regulator Assessment Authority Bill 2021, and under other general arrangement-making powers such as those in the Public Governance, Performance and Accountability Act 2013.

Members, staff and consultants

Appointment and conditions of appointed members

1.61 The Minister appoints members (other than the Departmental member) of the Authority by written instrument. The Minister is required to appoint one of these members as the Chair. Each of the appointed members, including the Chair, is appointed on a part-time basis. [Clauses 24(1), (4) and (5) of the Financial Regulator Assessment Authority Bill 2021]

1.62 In making individual appointments, the Minister is required to have regard to relevant experience, expertise and qualifications of the appointee. Regarding the makeup of the Authority as a group, the Minister is required to ensure, to the extent practicable, that the members of the Authority possess the skills and qualifications necessary for the Authority to perform its functions. These provisions will ensure that the Authority is suitably qualified to perform its assessment functions. [Clauses 24(2) and (3) of the Financial Regulator Assessment Authority Bill 2021]

1.63 The tenure of each appointed member must not exceed five years, but members may be reappointed. The total tenure of an appointed member can be no more than 10 years. [Clause 25 of the Financial Regulator Assessment Authority Bill 2021]

1.64 The Minister may appoint an acting member (other than the Departmental member) or an acting Chair to act:

•

during a vacancy in either of these positions; or

•

during the period an appointed member or the Chair is absent from duty or unable to perform the duties of the office.

[Clause 26 of the Financial Regulator Assessment Authority Bill 2021]

1.65 Members will be remunerated, and granted allowances, in accordance with a determination made by the Remuneration Tribunal. A leave of absence for an appointed member of the Authority is granted by the Minister. [Clauses 27 and 28 of the Financial Regulator Assessment Authority Bill 2021]

1.66 The Minister may delegate the powers to appoint an acting Chair and to grant any appointed member a leave of absence. These powers may be delegated to the Secretary of the Department or an SES employee or acting SES employee in the Department (other than a staff member of the Authority). Any of these delegated powers may not be exercised by the Departmental member. [Clause 48 of the Financial Regulator Assessment Authority Bill 2021]

1.67 An appointed member is not permitted to engage in any other paid work that conflicts or could conflict with the proper performance of the member's duties-for example, work that is remunerated by APRA or ASIC. [Clause 30 of the Financial Regulator Assessment Authority Bill 2021]

1.68 Section 29 of the Public Governance, Performance and Accountability Act 2013 requires the members, as officials of the Department, to disclose material personal interests in accordance with rules made for the purposes of that section. In addition to those rules (which require disclosure to other persons, such as to the other members of the Authority), appointed members are required to make these disclosures to the Minister. Failure to do so will constitute non-compliance with section 29 of that Act. [Clause 31 of the Financial Regulator Assessment Authority Bill 2021]

1.69 Engaging in paid work that conflicts with the appointed member's duties may result in termination of appointment. Failure to disclose material personal interests may also result in termination. Other grounds for termination are misbehaviour, inability to perform the duties of the office due to physical or mental incapacity, insolvency or bankruptcy, or consecutive absences from meetings other than on formal leave of absence. [Clause 33 of the Financial Regulator Assessment Authority Bill 2021]

1.70 The Minister may determine other terms and conditions on which an appointed member holds office. [Clause 29 of the Financial Regulator Assessment Authority Bill 2021]

1.71 An appointed member may resign by giving the Minister a written resignation. [Clause 32 of the Financial Regulator Assessment Authority Bill 2021]

Departmental member

1.72 Either the Secretary of the Department or an SES employee in the Department may be the Departmental member. The Departmental member is not made by appointment, but is determined by operation of the Financial Regulator Assessment Authority Bill 2021. By default, the Secretary is the Departmental member, unless the Secretary has nominated an SES employee in the Department. [Clause 23 of the Financial Regulator Assessment Authority Bill 2021]

1.73 The office of the Departmental member is not a public office whose terms and conditions of appointment (including remuneration and allowances) will be separately determined under the Remuneration Tribunal Act 1973. Instead, the Departmental member holds office on the same terms and conditions (including remuneration and allowances) as they hold as either as the Secretary of, or an SES employee in, the Department. [Clause 23(3) of the Financial Regulator Assessment Authority Bill 2021]

1.74 A nomination of an SES employee by the Secretary must be done in writing. [Clause 23(2) of the Financial Regulator Assessment Authority Bill 2021]

1.75 However, a nomination is not a legislative instrument (see item 22 of the table in section 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015).

1.76 The nomination may be varied or revoked in accordance with section 33(3) of the Acts Interpretation Act 1901.

Meetings and decision making

1.77 The Chair is required to convene meetings of the Authority to enable the Authority to perform its functions. The Authority may determine how its meetings are conducted, including how decisions are made during meetings. It can also determine that decisions can be made without meetings. [Clauses 34 and 35 of the Financial Regulator Assessment Authority Bill 2021]

1.78 Rules made for the purposes of section 29 of the Public Governance, Performance and Accountability Act 2013 will impact on whether individual members of the Authority are allowed to vote on proposed decisions (whether at meetings or otherwise) when the member has a material personal interest in the matter being considered.

Staff and consultants

1.79 The Authority will be assisted by a secretariat staff, consisting of APS employees in the Department (made available to the Authority by the Secretary). These APS employees are referred to as staff members for the purposes of the Financial Regulator Assessment Authority Bill 2021. [Clauses 5 and 36 of the Financial Regulator Assessment Authority Bill 2021]

1.80 The Department (through the Secretary) may engage consultants to assist the Authority. For example, consultants may be engaged to assist the Authority to conduct a particular aspect of an assessment. [Clause 37 of the Financial Regulator Assessment Authority Bill 2021]

1.81 The Secretary may delegate these functions or powers to an SES employee or to an acting SES employee in the Department. However, the power to make staff members available to the Authority cannot be delegated to a staff member. Additionally, delegated powers relating to staff and consultants may not be exercised by the Departmental member. [Clause 50 of the Financial Regulator Assessment Authority Bill 2021]

Information management

1.82 The Authority needs access to a wide range of information from APRA or ASIC to perform its assessment and reporting functions. Some of this information will not be suitable for publication or further disclosure. This information is referred to in the Financial Regulator Assessment Authority Bill 2021 as protected information. [Clause 5 of the Financial Regulator Assessment Authority Bill 2021]

1.83 In handling protected information:

•

the Authority is prohibited from including any protected information (except for publicly available information) in a report and must consult with APRA and ASIC (as relevant) to ensure that such information is not included; [Clause 39 of the Financial Regulator Assessment Authority Bill 2021]

•

an offence provision with a maximum penalty of two years' imprisonment also prohibits the unauthorised use or disclosure of protected information by entrusted persons; and [Clause 40 of the Financial Regulator Assessment Authority Bill 2021]

•

an entrusted person is not required to provide protected information to a court or tribunal (it is intended that this information would be sought by courts or tribunals, where appropriate, directly from APRA or ASIC). [Clause 41 of the Financial Regulator Assessment Authority Bill 2021]

1.84 The Authority may delegate, to a member or a staff member, the conduct of its consultation with APRA and ASIC about ensuring protected information is not included in a report or review. [Clause 49 of the Financial Regulator Assessment Authority Bill 2021]

What is protected information?

1.85 Protected information includes information that a person is prohibited from disclosing under a law of the Commonwealth other than the Financial Regulator Assessment Authority Bill 2021, or under a law of a State or Territory. This includes:

•

information that APRA is required to protect under section 56 of the APRA Act; and

•

information that ASIC is required to protect under section 127 of the ASIC Act.

[Paragraph (a) of the definition of 'protected information' in clause 5 of the Financial Regulator Assessment Authority Bill 2021]

1.86 Information of this kind will be protected information, even if the other Commonwealth, State or Territory law does not apply to a disclosure by the Authority or an entrusted person. For example, information covered by section 56 of the APRA Act will be protected information for the purposes of the Financial Regulator Assessment Authority Bill 2021, notwithstanding that an entrusted person will not be prohibited from disclosing information for the purposes of section 56 of that Act (due to new section 56(6AB) of that Act). Whether the entrusted person is authorised to disclose information received from APRA that is covered by section 56 of that Act in any particular case will be determined by the provisions of Division 3 of Part 4 of the Financial Regulator Assessment Authority Bill 2021. [Paragraph (a) of the definition of 'protected information' in clause 5 of the Financial Regulator Assessment Authority Bill 2021, and Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, item 3, section 56(6AB) of the APRA Act]

1.87 Protected information also includes information the disclosure of which would, or could reasonably be expected to, found an action for breach of a duty of confidence. [Paragraph (b) of the definition of 'protected information' in clause 5 of the Financial Regulator Assessment Authority Bill 2021]

1.88 This ensures that information provided by industry participants to APRA or ASIC will not be included in any reports of effectiveness and capability, or otherwise disclosed to the public by the Authority.

1.89 Protected information includes information protected by legal professional privilege. This is required as this privilege does not excuse disclosure of information to the Authority under Division 4 of Part 2 of the Financial Regulator Assessment Authority Bill 2021. [Paragraph (c) of the definition of 'protected information' in clause 5 of, and clause 21 of, the Financial Regulator Assessment Authority Bill 2021]

1.90 Protected information also includes information the disclosure of which would have negative effects. For example, this includes where publication may prejudice an enforcement matter (within the meaning of the Privacy Act 1988). [Paragraph (d) of the definition of 'protected information' in clause 5 of the Financial Regulator Assessment Authority Bill 2021]

Offence for unauthorised use or disclosure of protected information

1.91 The unauthorised use or disclosure of protected information by an entrusted person is a criminal offence punishable by imprisonment for up to two years. The criminal penalty appropriately reflects the impact of the disclosure of protected information, which covers categories of information, the disclosure of which would cause harm. [Clause 40 of the Financial Regulator Assessment Authority Bill 2021]

1.92 An entrusted person is defined broadly to cover the people that may receive protected information in the course of their duties. This includes members and staff members of the Authority, as well as the Secretary of the Department, any APS employees, and any consultants or contractors for the Authority (and their employees). [Clause 5 of the Financial Regulator Assessment Authority Bill 2021]

1.93 An entrusted person's use or disclosure of protected information is authorised in any of the following circumstances:

•

the use or disclosure is done:

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for the purposes of the Financial Regulator Assessment Authority Bill 2021; or

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in performing statutory functions or exercising statutory powers as an entrusted person; or

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in performing duties as an entrusted person in relation to the Authority (for example, when the use or disclosure is done in the course of assessing the effectiveness and capability of the regulators, allowing entrusted persons to share protected information with one another in the course of carrying out the Authority's core functions); [Clause 42 of the Financial Regulator Assessment Authority Bill 2021]

•

the disclosure is to the Secretary of the Department, or to APRA or ASIC; [Clause 43 of the Financial Regulator Assessment Authority Bill 2021]

•

the use is for, or the disclosure is to, an 'enforcement body' for or directly related to 'enforcement-related activities' (these expressions have the same meaning as in the Privacy Act 1988); [Clause 44 of the Financial Regulator Assessment Authority Bill 2021]

•

the Secretary has certified, in writing, that the use or disclosure by the person is necessary in the public interest, and the use or disclosure is in accordance with any conditions specified by the Secretary in the certificate. [Clause 45 of the Financial Regulator Assessment Authority Bill 2021]

1.94 Disclosure not being authorised by any of clauses 42, 43, 44 or 45 of the Financial Regulator Assessment Authority Bill 2021 is an element of the offence. This means an evidential burden does not rest with the defendant to adduce evidence that the use or disclosure was authorised by any of those provisions.

1.95 A certificate may only be made by the Secretary under clause 45 if the Secretary considers that a use or disclosure of information is necessary in the public interest. This is a higher threshold than the use or disclosure being in the public interest. It is intended that this discretion would only be exercised in limited circumstances, where the public interest cannot be served unless the particular use or disclosure is authorised by the certificate, and the other authorisations in the Financial Regulator Assessment Authority Bill 2021 are insufficient.

1.96 A certificate made by the Secretary under clause 45 is declared not to be a legislative instrument. [Clause 45(2) of the Financial Regulator Assessment Authority Bill 2021]

1.97 This is not a substantive exception to the Legislation Act, as the request would not otherwise be a legislative instrument for the purposes of that Act (see item 4 of the table in section 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015). Instead, this exception is included to assist readers of the legislation.

1.98 A person whose interests are affected by a decision of the Secretary to make a certificate (either with or without conditions), or not to make a certificate, may apply to the Administrative Appeals Tribunal for a review of the decision. Applications for review are considered and dealt with by the Tribunal in accordance with the Administrative Appeals Tribunal Act 1975. [Clause 45(4) of the Financial Regulator Assessment Authority Bill 2021]

1.99 There are two specific defences to the offence of unauthorised use or disclosure of protected information. The first defence is where the information is already lawfully available to the public. The second defence is where the use or disclosure is either authorised by a Commonwealth law, or is done in compliance with a requirement of a Commonwealth law, other than the Financial Regulator Assessment Authority Bill 2021 and certain other laws listed in that clause. For laws excluded from this second defence, use or disclosure may in some cases be separately authorised in accordance with one of the other reasons listed above, and therefore not covered by the offence. These two defences apply in addition to general defences such as those included in the Criminal Code. [Clauses 40(2) and (3) of the Financial Regulator Assessment Authority Bill 2021]

1.100 A defendant bears an evidential burden in relation to these defences. This is appropriate as, in many cases, it will be peculiarly within the knowledge of the defendant how the information may be publicly accessed, or the means by which the conduct was authorised by another law of the Commonwealth. In cases where these matters are peculiarly within the defendants' knowledge, it would be significantly more difficult for the prosecution to disprove these matters than it would be for the defendant to establish these matters. This is due to the wide range of publicly available information and circumstances in which Commonwealth laws authorise or require the disclosure of information. Placing an evidential burden on the defendant for these defences is therefore consistent with section 4.3.1 of the Guide to Framing Commonwealth Offences.

1.101 Section 15.4 of the Criminal Code (Extended geographical jurisdiction-category D) applies this offence provision to any entrusted person outside Australia, including any overseas appointed members. This is necessary to ensure that the offence applies to all entrusted persons performing work in relation to the Authority, whether in Australia or elsewhere. [Clause 40(4) of the Financial Regulator Assessment Authority Bill 2021]

Miscellaneous

Crown and geographic application

1.102 The Financial Regulator Assessment Authority Bill 2021, once enacted, will bind the Crown in each of its capacities. However, it will not make the Crown liable to be prosecuted for an offence. [Clause 6 of the Financial Regulator Assessment Authority Bill 2021]

1.103 The Financial Regulator Assessment Authority Bill 2021, once enacted, will extend to every external Territory, and will extend to acts, omissions, matters and things outside Australia. [Clause 7 of the Financial Regulator Assessment Authority Bill 2021]

Protection from liability

1.104 Members and staff members of the Authority are protected from civil liability for loss, damage or injury of any kind suffered by another person in the good faith performance of functions or duties, or in the good faith exercise of powers, of the Authority or of the member and staff member. Consultants and their officers and employees are also protected from civil liability in the same circumstances. [Clause 47 of the Financial Regulator Assessment Authority Bill 2021]

1.105 This enables the Authority to efficiently perform its functions and exercise its powers without being hampered by undue concerns over potential civil liability. APRA and ASIC staff members and individuals are also protected from any civil liability resulting from compliance with a request to provide information in accordance with clause 20(2) of the Financial Regulator Assessment Authority Bill 2021. [Clause 47 of the Financial Regulator Assessment Authority Bill 2021]

Delegations

1.106 The Minister, the Authority and the Secretary of the Department all have powers to delegate their functions or powers under the Financial Regulator Assessment Authority Bill 2021.

1.107 The Minister may delegate the following functions or powers to the Secretary, to an SES employee or an acting SES employee in the Department, but not to a staff member of the Authority:

•

appointing an acting Chair of the Authority under clause 26(2) of the Financial Regulator Assessment Authority Bill 2021; and

•

granting leave to any appointed member under clause 28.

1.108 Any of the Minister's delegated powers may not be exercised by the Departmental member. [Clause 48 of the Financial Regulator Assessment Authority Bill 2021]

1.109 The Authority may delegate the following functions or powers to a member or a staff member:

•

consulting with APRA and ASIC on reports and reviews under clauses 16(1) and (3) and 39(2) of the Financial Regulator Assessment Authority Bill 2021; and

•

requesting information, documents or answers to questions from APRA and ASIC under clause 20(2) (where this power is delegated to a staff member, the delegate must be at least Executive Level 2).

[Clause 49 of the Financial Regulator Assessment Authority Bill 2021]

1.110 The Secretary may delegate the following functions or powers to an SES employee or an acting SES employee in the Department:

•

making APS employees in the Department available to the Authority under clause 36 of the Financial Regulator Assessment Authority Bill 2021 (this power may not be delegated to a staff member); and

•

engaging consultants to assist the Authority under clause 37.

1.111 None of the Secretary's delegated powers are to be exercised by the Departmental member. [Clause 50 of the Financial Regulator Assessment Authority Bill 2021]

1.112 Some of these delegation provisions include limitations preventing delegations from being made to staff members of the Authority, and preventing delegated functions and powers from being performed or exercised by the Departmental member. These limitations are included to avoid any conflict, or perceived conflict, between a person's role as a staff member or the Departmental member on the one hand, and their functions and powers as a delegate on the other.

1.113 For any delegation under the Financial Regulator Assessment Authority Bill 2021, the delegate must comply with any written directions of the delegator. [Clauses 48(3), 49(3), and 50(4) of the Financial Regulator Assessment Authority Bill 2021]

Rules

1.114 The Minister has the power, by legislative instrument, to make rules prescribing matters:

•

required or permitted by the Financial Regulator Assessment Authority Bill 2021 to be prescribed by the rules; or

•

necessary or convenient to be prescribed for carrying out or giving effect to the Financial Regulator Assessment Authority Bill 2021.

[Clause 51 of the Financial Regulator Assessment Authority Bill 2021]

1.115 The rules can also set out the remuneration for appointed members if there is no relevant determination by the Remuneration Tribunal. [Clauses 27(1) and (2) of the Financial Regulator Assessment Authority Bill 2021]

Consequential amendments

1.116 APRA will be able to disclose protected information (within the meaning of section 56 of the APRA Act) to entrusted persons (including both members and staff members of the Authority). Disclosure in this way will not contravene the offence provision in that Act protecting the secrecy of that information. That offence provision will also not apply to the use or disclosure of that information by entrusted persons, as the secrecy provision in the Financial Regulator Assessment Authority Bill 2021 will apply instead. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, items 1 to 6, section 56 of the APRA Act]

1.117 ASIC will be authorised to disclose information given to it in confidence in the performance of functions and exercise of powers under the corporations legislation, and to disclose protected information (within the meaning of section 127 of the ASIC Act) to the Authority. As above, the use and disclosure of that information by entrusted persons will be regulated by the secrecy provision in the Financial Regulator Assessment Authority Bill 2021. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, item 7, section 127 of the ASIC Act]

1.118 Consequential amendments are made to secrecy provisions in the Banking Act 1959, the Insurance Act 1973 and the Life Insurance Act 1995 to allow the disclosure of information covered by these secrecy provisions to and by the Authority. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, items 9 to 13, section 11CM of the Banking Act 1959, section 109E of the Insurance Act 1973 and section 231E of the Life Insurance Act 1995]

1.119 Schedule 12 to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 introduced a mandatory information and document sharing scheme between APRA and ASIC. Under the scheme, if either regulator requests information or documents from the other regulator, the regulator must comply with the request and provide the information or documents. However, the Chair of APRA or the Chairperson of ASIC may make a determination that a request will not be complied with as it would compromise the functioning of the respective regulator. The Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 amends these provisions to require the Chair or Chairperson to set down their reasons in writing for not complying with the request for information or documents and to give these reasons to the Financial Regulator Assessment Authority, along with a copy of the determination. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, items 15 and 17, section 55B of APRA Act and section 122C of the ASIC Act]

Application and transitional provisions

Commencement

1.120 The Financial Regulator Assessment Authority Bill 2021 will commence in its entirety on the later of the day after the Financial Regulator Assessment Authority Bill 2021 receives the Royal Assent and 1 July 2021. [Clause 2 of the Financial Regulator Assessment Authority Bill 2021]

1.121 Consequential amendments to other Commonwealth Acts included in the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 will commence at the later of the start of the day after Royal Assent and the time the Financial Regulator Assessment Authority Bill 2021 commences. However, the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 will not commence at all if the Financial Regulator Assessment Authority Bill 2021 does not commence. [Clause 2 of the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021]

Timing of reporting functions

1.122 The assessment and reporting timeframes commence on 1 July 2021. [Clause 13 of the Financial Regulator Assessment Authority Bill 2021]

Application of information disclosure provisions

1.123 The disclosure of information to and by the Authority will be possible for information obtained by APRA or ASIC before or after the commencement of the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, items 8 and 14, Part 34 of the ASIC Act]

Transitional provisions

1.124 The Chair of APRA or the Chairperson of ASIC may make a determination in relation to a request for information or documents under section 55B(4) of the APRA Act or 122C(4) of the ASIC Act, respectively, between the commencement of those provisions and the commencement of the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021.

1.125 If this has occurred, the Chair or Chairperson must provide a copy of the determination and a statement of the reasons for the determination as soon as practicable after the commencement of the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021. This ensures that the Authority has complete information to assess each regulator's compliance with the information sharing obligations in the APRA Act and ASIC Act. [Schedule 1 to the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, items 16 and 18]