Issue 837, 16 December 2021
In this issue:
- Superannuation-related Acts update
- Critical infrasructure asset definitions
- Consultation: Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022
- APRA consultation: proposed amendments to SPS 310 Audit and Related Matters
- ASIC review: default income protection insurance
- ASIC breach reporting
- APRA and ASIC engagement
Superannuation-related Acts update
The Security Legislation Amendment (Critical Infrastructure) Act (see ASFA Action issue 834 for further background) received Royal Assent on 2 December and the Treasury Laws Amendment (2021 Measures No. 5) Act (see ASFA Action issue 836 for further background) received Royal Assent on 7 December.
Critical infrasructure asset definitions
The Minister for Home Affairs, Karen Andrews, has made the Security of Critical Infrastructure (Definitions) Rules (LIN 21/039) 2021 in accordance with section 61 of the Security of Critical Infrastructure Act 2018 (see ASFA Action issues 783, 827 and 830 for further background). The Explanatory Statement can be found here.
Of particular relevance to superannuation, Section 14 of the instrument prescribes that a registrable superannuation entity is critical to the security and reliability of the financial services and markets sector if the registrable superannuation entity holds assets over $20 billion.
Therefore an asset is a critical superannuation asset if:
- it is owned or operated by a registrable superannuation entity that holds assets over $20 billion; and
- it is used in connection with the operation of a superannuation fund.
Consultation: Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022
The Department of Home Affairs is consulting on the Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022 (see ASFA Action issues 830 and 834 for further background). There is an Exposure Draft and a supporting Explanatory Document for the consultation.
This Bill is the second part of the original Security Legislation Amendment (Critical Infrastructure) Bill 2020 which was split in two in line with recommendations made by the Parliamentary Joint Committee on Intelligence and Security (PJCIS).
This second bill is an Exposure Draft and would amend the Security of Critical Infrastructure Act 2018 to capture the remaining elements from the original Bill together with amendments suggested by stakeholders and throughout the PJCIS review process, including:
- the Risk Management Program under proposed Part 2A;
- enhanced cyber security obligations under proposed Part 2C;
- Systems of National Significance under proposed Part 6A; and
- information sharing provisions for regulated entities.
If you have any comments you would like ASFA to consider in preparing its submission please forward them to Byron Addison by COB Monday 24 January 2022.
APRA consultation: proposed amendments to SPS 310 Audit and Related Matters
APRA is consulting on proposed amendments to Prudential Standard SPS 310 Audit and Related Matters (SPS 310). The letter to trustees can be found here.
The proposed updates aim at aligning SPS 310 with recent changes to APRA’s reporting standards for superannuation. The specified data items include those that will be used for APRA’s administration of the Your Future, Your Super performance test and data published in APRA’s Heatmap.
Specifically, APRA intends to update SPS 310 to:
- remove the requirement to review seven reporting standards because the data collected will (after a short period of parallel reporting) be superseded by new reporting standards;
- leave the requirements applying to six existing reporting standards unchanged; and
- require assurance over six new reporting standards. Of these, the review must cover specified data items within three reporting standards.
The letter to trustees also states the information provided under APRA reporting standards that must be covered in the RSE auditor’s annual report, and the level of assurance required.
Consultation on these proposals closes on 11 March 2022.
If you have any comments you would like ASFA to consider in preparing its submission please forward them to Fiona Galbraith by COB Friday 11 February 2022.
ASIC review: default income protection insurance
ASIC has released 21-343MR Super trustees offering default income protection insurance urged to check on member outcomes which highlights the need for trustees to examine outcomes for their members and consider whether they are delivering value for money through their insurance in superannuation offering.
The review looked at a number of funds that provide default income protection insurance on an opt-out basis to their members. The review looked in particular at how offset clauses applied, with offset meaning that the insurance benefit is reduced if other kinds of income support (such as sick leave or workers‘ compensation) is received.
ASIC found that: there was variation in the types of income that were offset against IP benefits; disclosures about offset clauses were incomplete and difficult to understand; and that trustees needed to provide more evidence to show that they had rigorously analysed how their offset clauses affect member outcomes.
To address these issues ASIC recommends that:
- data be obtained and analysed to assess how offsets affect member outcomes and value;
- trustees improve the extent and quality of disclosure to members relating to IP offsets;
- trustees clearly explain to members how their offset clauses work so that members can make informed decisions.
ASIC breach reporting
From 1 October 2021, new breach reporting arrangements came into effect for Australian Financial Services Licensees (AFS licensees), including superannuation trustees (see ASFA Action issues 828, 823, 817 and 788 for further background).
The change in the reporting obligation to ‘reportable situations’ has resulted in a more expansive reporting regime for AFS licensees.
ASIC has updated its website with further information on breach reporting for superannuation trustees, including providing more clarity on reporting obligations.
Super trustees that hold an AFS licence should lodge reports about reportable situations to ASIC using the prescribed form in the ASIC Regulatory Portal. Alternatively, for matters that need to be reported to both APRA and ASIC, under the dual reporting framework super trustees may satisfy their obligations by lodging the one report containing all the required information to APRA.
ASIC has advised that, if trustees have any questions, you can contact them at SuperRegRoles@asic.gov.au where ASIC may be able to address any concerns that you may have.
APRA and ASIC engagement
APRA and ASIC have published their second annual update on engagement between the two regulators.
Of particular relevance to superannuation APRA and ASIC have identified a number of areas where they have acted jointly to support confidence in the superannuation industry and deliver quality superannuation outcomes for Australians. These include the implementation of the Member Outcomes obligations and Design and Distribution Obligations, administered by APRA and ASIC respectively, to ensure trustees understood the interaction between the two sets of obligations. Outputs from that work included a joint letter to industry, joint speaking engagements and a CEO roundtable.
There has also been joint communication to industry regarding the agencies’ expectations in relation to superannuation trustees’ oversight of advice fee deductions.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
