Issue 981
In this issue:
- Digital disclosure legislative instruments: ASIC seeking preliminary feedback
- Compensation Scheme of Last Resort: post implementation review
- Scam and fraud practices of superannuation trustees: ASIC comments
- APRA and ASIC focus areas
- Scams prevention framework: Senate Committee report
- APRA reporting: APRA Connect taxonomy updates
Digital disclosure legislative instruments: ASIC seeking preliminary feedback
ASIC is seeking initial feedback on a proposal to remake two legislative instruments relating to digital disclosure, that are scheduled to sunset on 1 October:
ASIC will also be considering whether updates are needed to the related regulatory guide, RG 221 Facilitating digital financial services disclosures.
ASIC has posed a number of questions to help it assess the efficiency and effectiveness of the instruments and regulatory guide to date and what, if any, changes may be needed.
- What are your views on how instrument 2015/647 operates in practice? Have you experienced any challenges and do you have any suggested changes to the instrument?
- What are your views on how instrument 2015/649 operates in practice? How has the removal of barriers to digital disclosure by that instrument impacted how you provide disclosure? Have you experienced any challenges and do you have any suggested changes to the instrument?
- What parts of RG 221 do you continue to find useful? Are there any areas of guidance that should be added to, or removed from, the regulatory guide, and how useful are the examples?
- What digital channels (for example, mobile app, email, SMS, other forms of digital communication) do you currently use to provide disclosures and other notices to clients?
- What are some key changes to how you have provided digital disclosure over the past ten years, and are you observing any future trends?
- Are there changes in digital communication that should be reflected in any updates to the instruments or RG 221?
- What has been your experience in navigating the good practice guidance for digital disclosure (RG 221, section D) alongside the good disclosure principles (RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations), section C)? Do you have any suggestions, including whether you see any material benefit from some consolidation of this good practice guidance?
ASIC has emphasised that it is at an initial feedback stage and seeking a consolidated response at an industry association level rather than direct submissions. ASIC will consult publicly on any proposed updates to the instruments and RG 221 at a later date.
If you have any feedback in response to ASIC’s questions – or other comments in relation to the legislative instruments and/or RG 221 – please forward it to Fiona Galbraith by close of business Tuesday 11 February.
Compensation Scheme of Last Resort: post implementation review
The Government has announced a post-implementation review of the Compensation Scheme of Last Resort (CSLR), to consider:
- how the CSLR is delivering on its intended objectives
- how the CSLR funding model is formulated, including its potential impacts on businesses who fund the industry levy
- how the powers of the CSLR Operator interact with delivery of the scheme
- the current scope of the CSLR and any related matters.
The review is also to have regard of other current and recent reviews and inquiries as relevant.
Broadly, the CSLR covers situations where a consumer has a determination from AFCA in their favour in respect of a complaint about eligible financial products and services, that determination awarded compensation that has gone unpaid after 12 months, steps have been taken to attempt to secure payment and the CSLR operator reasonably believes the compensation is unlikely to be paid, or fully paid. ‘Eligible’ financial products and services are provision of personal financial advice, dealing in securities, or engaging in a credit activity.
The CSLR is industry-funded via levies payable by the sub-sectors that provide the ‘eligible’ financial products and services (‘in scope’ sub-sectors).
Superannuation is not one of the financial products or services covered by the CSLR however:
- funds may be liable to pay the industry funding levy to the extent they provide personal financial advice
- the legislative framework permits the Minister to determine a special levy on sub-sectors beyond those ‘in-scope’ in certain instances where the CSLR operator requires additional funding to meet higher than expected costs. The explanatory material accompanying the Bills at the time the CSLR was established noted this was intended to cover situations such as “where a large financial services provider becomes insolvent, or where a “black swan” event occurs in the financial services industry.”
If you have any feedback you would like ASFA to consider in relation to the post-implementation review of the CSLR, please forward it to Julia Stannard by close of business Wednesday 19 February.
Separately, the operator of the CSLR has registered the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Cost Estimates for 2025-26 Levy Period) Determination 2025. This provides an initial estimate of the levy for ‘in scope’ sub-sectors for 2025-26. The CSLR operator has also indicated there will be a need to raise an additional special levy, with formal notification to the Minister to be made early in 2025-26. The consideration of any special levy will be determined by the Minister and subject to separate parliamentary approval.
Scam and fraud practices of superannuation trustees: ASIC comments
ASIC has written to superannuation trustees urging them to strengthen anti-scam practices, or risk exposing members to harm.
The open letter outlines ASIC’s guidance for superannuation trustees in preventing, detecting and responding to scams and fraud activity. It follows an ASIC review of 15 superannuation trustees which found none had an organisation-wide scams strategy in place.
The letter references recent comments by AFCA that while the number of scam-related complaints in superannuation is still small, the loss claimed is sometimes significant and it is seeing increasing instances of more sophisticated scam activity in the industry. The letter notes that in ASIC’s review, it found that trustees:
- were overly reliant on anti-fraud measures and had limited focus on the specific risks and harms associated with scams – for example, they focused on confirming that the person requesting a transfer was the member rather than looking for flags to indicate that the member may have been tricked
- did not have sufficient oversight of their external administrators’ anti-scam and anti-fraud practices
- lacked many of the foundational anti-scam practices that ASIC identified in relation to banks. For example, none of the trustees reviewed had a scams strategy, or dedicated reporting on scams, or had reviewed their scam prevention, detection and response capabilities.
ASIC states that it expects trustees to capture and record scam attempts accurately, so they have the necessary data to properly assess the real risk of scams to members (with this observation similarly applicable to fraud).
The letter requests that trustees:
- conduct a preliminary assessment of their anti-scam and anti-fraud measures—including for services provided by external administrators—to identify any areas for improvement
- read REP 761 Scam prevention, detection and response by the four major banks and REP 790 Anti-scam practices of banks outside the four major banks, and address the baseline measures set out in those reports in addition to the areas of risk and weakness identified in the letter
- consider whether it is appropriate to allocate the scam (and fraud) management key function to one of the trustee’s accountable persons as it prepares for the incoming Financial Accountability Regime
- leverage industry bodies and bilateral relationships to share information and promote improvements across the industry.
APRA and ASIC focus areas
APRA and ASIC have given a joint speech to industry outlining their key priorities for 2025.
Remarks by APRA Deputy Chair Margaret Cole focussed on fund governance, including in relation to fund expenditure, investment (particularly as regards valuation and liquidity risk governance) and operational capabilities.
Ms Cole reiterated that APRA is undertaking a review of the core governance prudential standards across banking, insurance and superannuation, including SPS 510 Governance and SPS 520 Fit and Proper. The intention is “to clarify, simplify and consolidate the standards, drive improvements and ensure the standards align with contemporary practice” but not to review different ownership models.
Ms Cole noted that while many of the entities APRA regulates have made progress in strengthening governance in recent years, there remains room for improvement. Based on the observations of APRA’s supervision teams across industries, instances of poor governance practices tend to occur in three broad areas – material prudential concerns regarding an entity’s operational risk and risk culture; lack of robustness in board governance processes, including in relation to the nomination and appointment of directors; and the persistence of poor governance in processes such as board renewal and tenure.
Remarks by ASIC Commissioner Simone Constant focussed on:
- the need to improve member service standards
- current and recent regulatory action in respect of superannuation, with the prospect of continued enforcement action “to target member service failures as well as misconduct exploiting superannuation savings”
- the need for greater focus on scam prevention (see earlier item in this ASFA Action)
- a forthcoming discussion paper on whether the current settings for private markets are appropriate, particularly given the increasing investment in private markets by superannuation funds
Scams prevention framework: Senate Committee report
The Senate Economics Legislation Committee has tabled its report into the Scams Prevention Framework Bill 2024.
As reported in ASFA Action issue 972, the Bill will create the Scams Prevention Framework (SPF) for preventing and responding to scams impacting the Australian community. Superannuation is not one of the sectors that will be initially designated for coverage by the Framework but the Minister has indicated it could be designated in future.
The Committee majority recommended passage of the Bill.
The Independent Senator David Pocock recommended a number of reforms to the Bill and specifically recommended that the Government “should move to designate the superannuation industry as soon as practicable”. Coalition and Greens senators also made recommendations for amendments to the Bill, but none specifically in relation to superannuation.
APRA reporting: APRA Connect taxonomy updates
APRA has updated the APRA Connect Taxonomy Artefacts webpage with additional superannuation artefacts.
These relate to the following reporting standards finalised as part of phase 2 (‘depth’) of the Superannuation Data Transformation Project, in December (see ASFA Action issue 975):
- SRS 251.0 Insurance arrangements
- SRS 332.1 Investment and transaction fees and costs
- SRS 340.0 RSE Licensee financial standards
- SRS 550.0 Asset allocation
- SRS 551.0 Liquidity
- SRS 552.0 Securities subject to repurchase and resale and securities lending and borrowing
- SRS 553.0 Investment exposure concentrations and valuations
- SRS 604.0 RSE licensee profile
- SRS 605.0 RSE structure
- SRS 606.1 RSE profile fees and costs arrangements
- SRS 607.0 RSE business model.
APRA has indicated the draft taxonomy artefacts are intended to enable early familiarisation in the APRA Connect test environment. APRA does not intend to update the draft data collections before go live, beyond correcting errors identified during familiarisation.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
