ASFA Action Issue 969

In this issue:

Applications for relief and no-action letters: ASIC consultation

ASIC is seeking industry feedback on proposed updates to Regulatory Guide RG 51 Applications for relief and Regulatory Guide RG 108 No-action letters.

The updates are intended to reflect ASIC’s current regulatory approaches to both applications for relief and no-action letters, to incorporate relevant additional guidance and amend outdated references. ASIC is not proposing to make significant changes to the factors that it considers when assessing applications.

Proposed updates to RG 51:

Proposed updates to RG 108:

ASIC is seeking submissions by 5pm Monday 18 November.

Fund-level expenditure: APRA intensified supervision

APRA has written to all registrable superannuation entity (RSE) licensees outlining its approach for intensifying supervision of fund-level expenditure.

The letter notes that despite obligations on RSE Licensees to consider the best financial interests of their members and consistently to promote those interests, APRA has observed deficient practices and questionable expenditure in some areas. As a result, APRA will intensify its scrutiny of fund-level expenditure to hold RSE Licensees accountable to improve practices, reduce spending that is deemed to not be in members’ best financial interests and promote the financial interests of their members.

The letter provides RSE licensees with clarity about APRA’s planned activity in this area over the next 12 months, in accordance with APRA’s recently released Corporate Plan (see ASFA Action issue 962).

Across all RSE Licensees, APRA will prioritise supervisory attention on fund expenditure where member benefit is not immediately evident or may not be reasonably justified.

APRA will take a targeted approach, partly informed by SRF 332.0 Expenses data and will initially focus its supervisory efforts on the following:

APRA’s focus on expenditure as part of the ongoing suite of supervision priorities does not mean that all reported expenditure items will be reviewed. APRA’s intent is to focus on those items of expenditure where there is potential to improve practices and outcomes across the industry. APRA’s attention will also be informed by market intelligence and matters of public interest.

APRA notes it is committed to publishing an increasing amount of data to improve transparency across the superannuation industry and on 30 October will publish the expenditure data for financial year 2022-23 on both a fund-level and aggregate basis. APRA will publish annual expenditure data on an ongoing basis and anticipates publishing financial year 2023-24 data in early 2025.

Operational risk financial requirement: APRA finalises SPS 114

APRA has registered the Superannuation (prudential standard) determination No 6 of 2024.

This instrument revokes the current version of SPS 114 Operational risk financial requirement and determines an updated version that will take effect from 1 July 2025 – the same date that CPS 230 Operational risk management commences.

The amendments to the prudential requirements in SPS 114 are aimed at ensuring that RSE licensees maintain an appropriate level of funding to address operational risks, that they are better positioned to use the financial resources to meet the operational risk financial requirement (ORFR) when needed, and that they can manage the impact of disruption and smooth operational risk related losses fairly over time and across different cohorts of beneficiaries.

According to the explanatory statement, the amendments include:

The registration of the updated standard follows two rounds of consultation by APRA, in 2022-2023 and then more recently February-May this year (see ASFA Action issue 934 for background).

Material service provider register: APRA issues template for CPS 230

APRA has released a material service provider (MSP) register template to assist regulated entities – including superannuation entities – with their compliance with CPS 230 Operational risk management.

APRA finalised CPS 230 in July 2023 and the accompanying guidance CPG 230 in June this year (see ASFA Action issues 962, 951 and 907 for background). CPS 230 will commence on 1 July 2025, although there are some transition arrangements under which:

One of the requirements of CPS 230 is that regulated entities provide a register of their MSPs to APRA annually. APRA requests that the first MSP register is submitted by 1 October 2025. When releasing the final version of CPG 230, APRA flagged that it would release a template for the MSP register.

APRA has now released its MSP template to assist entities in demonstrating the linkages between their critical operations and the MSPs they rely upon. The use of the template is APRA’s preferred method for regulated entities to submit their registers to APRA for meeting the register requirement in CPS 230.


 

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.

 

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