Issue 706, 16 April 2019
In this issue:
- AFCA comparative tables: consultation
- Insurance in Superannuation Voluntary Code of Practice to be amended
- Protecting Your Super: ASIC MoneySmart information
- APRA’s new enforcement approach
- Modern Slavery Act 2018: consultation on draft guidance materials
- Oversight of fee deductions from super accounts: APRA and ASIC expectations
- Family law super splitting: Law Reform Commission proposes reforms
AFCA comparative tables: consultation
The Australian Financial Complaints Authority (AFCA) has sought ASFA’s views on its proposed approach to publishing detailed comparative tables on complaints and systemic issue investigations. These comparative tables will provide data that is attributable to identified ‘financial firms’ that are members of AFCA, including trustees of APRA-regulated superannuation funds.
In accordance with ASIC Regulatory Guide 267 (RG 267) and AFCA’s Rules, AFCA must publicly report, at least annually, information about complaints it receives, identified at the member firm level. The Financial Ombudsman Scheme and the Credit and Investments Ombudsman previously published comparative reports annually, which included details about complaints received or accepted for each relevant financial firm and the outcomes of complaints closed by each financial firm. In contrast, complaint data at the trustee level is not publicly reported by or available from the Superannuation Complaints Tribunal, given its secrecy obligations and legislative limitations.
AFCA has now commenced a brief and limited consultation on its proposed new approach to the publication of comparative tables. AFCA’s proposed approach is outlined in a consultation paper made available to ASFA, other industry associations and some of AFCA’s larger member firms. Significantly, it should be noted that the comparative metrics will, for the first time, result in the identification of superannuation providers involved in complaints made to/considered by AFCA.
AFCA has authorised ASFA to make the consultation paper available to our members, and to coordinate the provision of feedback from our members to AFCA. If you have any comments that you would like ASFA to consider in our response to AFCA, please forward them to Julia Stannard by close of business Friday 26 April.
In addition to the extension of comparative table reporting to superannuation complaints, it should be noted that AFCA will shortly begin to include the name of the relevant financial firm in all new published AFCA decisions, replacing the current anonymised reporting of decisions. This change will come into effect from 1 July 2019 (after a change to AFCA’s Rules) and is not part of the current consultation on comparative metrics.
A further consultation by ASIC in relation to internal dispute resolution arrangements and the publication of complaint-related data by ASIC is still anticipated to commence shortly.
Insurance in Superannuation Voluntary Code of Practice to be amended
Given the recent passage of the Protecting Your Super (PYS) package and the release of the PYS regulations, the owners of the Insurance in Superannuation Voluntary Code of Practice (Code) will shortly be amended.
The Code owners—ASFA, the Financial Services Commission and the Australian Institute of Superannuation Trustees—are currently reviewing the Code and will make amendments to ensure it aligns with the PYS package measures (see ASFA Action issues 698, 699 and 704 for further information).
The Code amendments will relate principally to the definition of ‘inactivity’ and the associated member communication requirements.
A draft of the revised Code is expected to be ready by early May 2019 and it will then be released for a brief consultation period.
If you have any comments you would like ASFA to consider prior to the consultation period, please contact Byron Addison on 02 8079 0834.
Protecting Your Super: ASIC MoneySmart information
ASIC has updated its MoneySmart website to include some consumer-focused information regarding the Protecting Your Super Package (PYS) reforms. This follows on from ASIC’s recent letter to ASFA regarding ASIC’s expectations on superannuation trustees in relation to member communications (see ASFA Action issue 704).
ASIC has indicated to ASFA that they encourage trustees to refer to this content where appropriate, but also remind trustees that a reference to MoneySmart in itself is not sufficient to ensure the communications are balanced.
APRA’s new enforcement approach
APRA has released details on the future role and use of enforcement activities in achieving its prudential objectives, as well as the final report from its recent Enforcement Strategy Review.
APRA’s new Enforcement Approach sets out how APRA will approach the use of its enforcement powers to prevent and address serious prudential risks, and to hold entities and individuals to account.
The new Enforcement Approach is founded on the results from the recent Enforcement Review, conducted by APRA Deputy Chair John Lonsdale (see ASFA Action issue 691 for background). The Review made a number of recommendations designed to help APRA better leverage its enforcement powers to achieve sound prudential outcomes.
Mr Lonsdale said the Review found APRA had, on the whole, performed well in its primary role of protecting the soundness and stability of institutions, but could achieve better outcomes in the future by taking stronger action earlier where entities were not cooperative or open, and by being more willing to set public examples.
APRA Chair Wayne Byres said APRA would implement all the recommendations, including:
- adopting a “constructively tough” appetite to enforcement and setting it out in a board-endorsed enforcement strategy document
- ensuring APRA supervisors are supported and empowered to hold institutions and individuals to account, and strengthening governance of enforcement-related decisions
- combining APRA’s enforcement, investigation and legal experts in one strengthened support team, and ensuring resources are available to support the pursuit of enforcement action where appropriate
- strengthening cooperation on enforcement matters with ASIC.
Mr Byres said that: “With the release of APRA’s revised Enforcement Approach today, the new enforcement appetite comes into effect immediately”.
Modern Slavery Act 2018: consultation on draft guidance materials
The Government is consulting on guidance material for entities that are required to report under the Modern Slavery Act 2018 (the Act), which may potentially include superannuation funds and other investment organisations.
The Act was passed by Parliament on 29 November 2018 and entered into force on 1 January 2019. The Act established a national Modern Slavery Reporting Requirement (Reporting Requirement) for certain large businesses and other entities in the Australian market.
The Modern Slavery Business Engagement Unit in the Department of Home Affairs (DHA) is responsible for implementing the Act, including providing general advice and support to entities about compliance with the Reporting Requirement.
According to material published by the DHA, the Reporting Requirement is intended to support the Australian business community to identify and address their modern slavery risks, and maintain responsible and transparent supply chains. Entities required to comply with the Reporting Requirement must prepare annual Modern Slavery Statements setting out their actions to assess and address modern slavery risks in their operations and supply chains. These statements will be made publicly available through an online central register.
The DHA has released for comment the Modern Slavery Act 2018: Draft guidance for reporting entities. The DHA is inviting submissions on the draft guidance by 19 May.
Oversight of fee deductions from super accounts: APRA and ASIC expectations
APRA and ASIC have jointly written to all registrable superannuation entity (RSE) licensees to reinforce the importance of trustees undertaking appropriate oversight of fees and other charges being deducted from members’ superannuation accounts for payment to third parties such as financial advisers.
The letter follows the identification, during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, of cases of financial advice fees being charged without the provision of the relevant services. The letter notes that the regulators have separately identified industry practices in relation to trustee oversight that fall below expected standard, with a number of these matters currently the subject of enforcement investigations or actions.
The letter states that:
All trustees must have in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees and other charges are deducted from members’ superannuation accounts.
Accordingly, APRA and ASIC expect all trustees to be reviewing the robustness of their existing governance and assurance arrangements for fees charged to members’ superannuation accounts, and to address any identified areas for improvement in a timely manner. We expect these reviews to be substantially completed by 30 June 2019.
Should such reviews uncover any significant issues or deficiencies in the risk management systems and processes of trustees, our strong expectation is that trustees give urgent consideration as to whether a reportable breach has occurred, and if so, whether it has been escalated in a manner that will ensure appropriate remediation takes place.
The letter highlights a number of issues that are to be considered by trustees in their oversight practices in relation to the deduction of financial advice fees. These include whether:
- the deductions are explicitly authorised by members
- services have been provided
- the deduction consistent with the sole purpose test
- the deduction is in the best interests of members?
The letter also highlights the expectations of APRA and ASIC in relation to oversight practices as well as concerns regarding the remediation arrangements adopted by trustees in some circumstances.
Family law superannuation splitting: Law Reform Commission proposes reforms
The Australian Law Reform Commission has recommended some reforms to the family law superannuation splitting regime, as part of a comprehensive review of the Family Law Act 1975 (see ASFA Action issue 688 for background).
In particular, the Commission has recommended amendments to the Family Law Act to:
- provide a presumption that the value of superannuation assets accumulated during a relationship are to be split evenly between the parties
- simplify the process for splitting superannuation including:
- developing template superannuation splitting orders for commonly made superannuation splits
- when the applicant is suffering economic hardship, requiring superannuation trustees to limit the fees they charge members and their former spouse for services provided in connection with property settlement under Pt VIII to the actual cost of providing those services.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
