Issue 980
In this issue:
- Mandatory service standards for superannuation industry
- Streamlining Australia’s financial reporting architecture: consultation
- Financial Accountability Regime: regulator ‘drop-in’ session – registering accountable persons
- ASIC key issues outlook 2025
Mandatory service standards for superannuation industry
The Government has today announced it will introduce mandatory and enforceable service standards for all large APRA-regulated superannuation funds, to improve member outcomes.
According to the Government, the new standards will improve how funds engage with their members and put member interests at the heart of service delivery.
The new standards will initially target critical areas where complaints data shows the greatest need for improvement, such as:
- the timely and compassionate handling of death benefits
- fair and efficient processing of insurance claims
- clear, respectful and accessible communications with members.
Treasury will work with consumer advocates, regulators and industry stakeholders to develop the standards. Draft standards will be released for public consultation.
The Government notes that this reform:
- aligns with the newly legislated objective of superannuation: “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
- complements the Government’s retirement phase of super reforms and the Delivering Better Financial Outcomes package, which are about ensuring Australians receive better advice and information, improved products and greater transparency.
Streamlining Australia’s financial reporting architecture: consultation
Treasury has released a consultation paper seeking views on a proposed body that will combine the current Australian Accounting Standards Board, Auditing and Assurance Standards Board and Financial Reporting Council.
The Government has indicated this will reform Australia’s institutional arrangements with a new single entity for the setting of accounting, sustainability, auditing and assurance standards.
The consultation paper explains the rationale for the change in the context of the significant shift underway in international best practice financial reporting:
“Financial markets are recognising that a wider range of factors, including environmental, social and governance concerns, are important sources of material financial risks and opportunities for businesses and financial institutions. This in turn is driving demand from investors, regulators and other interested parties for greater transparency in the form of high-quality, standardised disclosures. The creation of the International Sustainability Standards Board in 2021 by the International Financial Reporting Standards Foundation to develop globally consistent and financially integrated sustainability-related disclosure standards responds to this demand.
It is critical that Australia’s financial reporting system keeps pace with these and other developments to support Australia’s reputation as an attractive destination for international capital. However, there are structural barriers within the current institutional arrangements for standard setting that constrain the Government’s ability to respond to future developments and needs.”
The proposal to create a ‘one stop shop’ for the development and issuance of standards was first announced by the Government in November 2023 (see ASFA Action issue 925).
Treasury is seeking comments by close of business Friday 21 February.
Financial Accountability Regime: regulator ‘drop-in’ session – registering accountable persons
Ahead of the commencement of the Financial Accountability Regime (FAR) for the superannuation and insurance industries from 15 March, APRA and ASIC are holding APRA Connect ‘drop-in’ sessions on registering accountable persons.
The session for superannuation entities will be held on Thursday 6 February 2025, 2-3pm AEDT. ASFA members interested in attending can register directly via this link.
The drop-in session will provide a walkthrough of the APRA Connect ‘Financial Accountability Regime – Registration’ form and allow time for Q&A. The session is primarily targeted at individuals who are assigned the APRA Connect ‘FAR Administrator’ role. The form must be submitted between 13 – 22 February 2025 for each identified accountable person of the accountable entity and its significant related entities to ensure that all accountable persons are registered by the FAR commencement date of 15 March 2025.
The regulators have asked us to highlight the opportunity for members to submit questions in advance of the session to FAR@apra.gov.au by 30 January.
ASIC key issues outlook 2025
ASIC has identified the most significant current, ongoing and emerging issues within its regulatory remit in 2025 to provide insights for Australian businesses and consumers.
Of interest for superannuation, these include:
- Superannuation fund service provision – as more members enter the retirement phase, they will have more frequent, and more complex, interactions with their superannuation funds so trustees will need to ensure they can meet members’ changing needs. ASIC will publish findings from a review of member services and will not hesitate to take enforcement action where appropriate.
- Unsuitable superannuation advice resulting in adverse consumer outcomes – ASIC has observed considerable volumes of superannuation fund inflows into high-risk investments, including property investments, via superannuation platforms and significant payments of superannuation monies to lead generation businesses. High pressure sales tactics and the use of social media algorithms to target receptive audiences, has enabled rapid growth in these types of business models. ASIC will continue to warn Australians about this conduct and will take enforcement action where it sees misconduct exploiting superannuation savings. ASIC also has a current surveillance underway assessing the quality of financial advice to establish SMSFs.
- Cyber-attacks, data breaches, and internal system failures undermining market confidence and causing financial loss – the continuing risk in this area is driven by the ongoing digitalisation of the financial sector, reliance on controls of third-party service providers, and legacy systems, which are vulnerable to cyber-attacks and data breaches. ASIC expects directors to ensure their organisation’s risk management framework adequately addresses cyber security threats and that controls are in place to protect assets and information and enhance cyber resilience. ASIC will be reviewing cyber and operational resilience in various sectors and sharing its findings with companies and entities based on its findings. ASIC has active investigations underway in the cyber security space.
- Consumer losses through fraud and scams, driven by increasing sophistication and the use of technology – evolving types of financial frauds and scam continue to threaten consumers, investors, and small businesses, as people are deceived out of their money and/or into divulging sensitive personal information.
- Poor quality climate-related financial disclosures leading to misinformed investment decisions – high quality, consistent and comparable information about reporting entities’ climate-related risks and opportunities facilitates confident and informed decision making by investors. As new climate related financial reporting obligations are rolled out, reporting entities will need to ensure they have appropriate governance and reporting processes in place to provide greater transparency to Australians and investors about their climate-related risks and opportunities. ASIC will provide support through guidance. ASIC will also continue to scrutinise disclosures where entities mispresent financial products or investment strategies as environmentally friendly, sustainable or ethical when they are not.
- Changing dynamics between public and private markets – ASIC will be leading discussion on issues key to the ongoing and future success of Australia’s capital markets and seeking feedback on whether regulatory settings and supervision approach needs to adapt in light of changing market dynamics. Both public and private markets are important to the economy and play a role in generating wealth. Through superannuation investments, many Australians have indirect exposure to private assets. Private markets operate differently than public markets and are inherently less transparent. ASIC is also increasing its focus on private markets through our surveillance work.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
