Issue 842, 22 February 2022
In this issue:
Remaking of super disclosure instruments: ASIC consultation
ASIC is consulting on proposals to remake relief contained in seven legislative instruments relating to specific financial services disclosure requirements. Most of the instruments will automatically repeal or cease in the next two years if not remade.
Consultation Paper CP 358 Remaking ASIC relief on PDSs, superannuation dashboards and FSGs (CP 358) outlines ASIC’s proposal to consolidate the seven instruments into three new instruments without substantive changes.
In particular, CP 358 outlines ASIC’s proposals to:
- remake, in a single new instrument, relief in Class Order instruments that relate to Product Disclosure Statement (PDS) in-use notices for employer-sponsored superannuation and product dashboard disclosure – [CO 12/415], [CO 13/1534] and [CO 14/443])
- remake, in a single new instrument, relief in instruments that relate to shorter PDSs and PDS obligations for superannuation trustees, IDPS operators and responsible entities of IDPS-like schemes – [CO 12/749], [CO 13/797] and ASIC Corporations (Superannuation: Investment Strategies) Instrument 2016/65
- remake, as a new instrument, a Class Order that relates to Financial Services Guides in time critical situations – [CO 12/417]
- give effect to the new instruments for a period until 1 October 2027.
ASIC has reached the preliminary view that the existing instruments are generally operating effectively and continue to form a necessary and useful part of the legislative framework. However, in remaking the instruments, ASIC proposes to omit relief that has become redundant and update some conditions of the relief.
If you have any feedback that you would like ASFA to consider in relation to the consultation, please forward it to Fiona Galbraith by close of business Friday 18 March.
Superannuation Data Transformation: APRA consultation on publication of data
APRA has commenced consultation on proposals to publish its enhanced data collection after the completion of Phase 1 of its multi-year Superannuation Data Transformation project.
APRA determined ten new reporting standards under Phase 1 of the project last September (see ASFA Action issue 825).
APRA has now released a discussion paper: Superannuation Data Transformation – Publications and Confidentiality. This outlines proposals to publish the enhanced data collection, including what will – and will not – be treated as confidential.
Starting in June this year, APRA proposes publishing new aggregate industry, fund-level and product-level statistics containing key metrics, including improved data on insurance arrangements, expenses, member demographics and asset allocation classifications. Where relevant, new approaches will be used to better enable comparisons across complex fee and cost structures or insurance design.
APRA is proposing to determine most of the data collected under Phase 1 as ‘non-confidential’, and therefore able to be published. It will be the first time APRA has published data on all products and investment options — until now, APRA has only published product-level data for MySuper products.
In addition to the expanded data publications, APRA has indicated it plans to introduce two types of datasets for users to access published statistics in a format that is easily consumed by their own reporting tools:
- key metrics datasets which primarily mirror the statistics in the publications without formatting
- granular datasets for sophisticated users to access more detailed data in a format that closely resembles the data as reported.
APRA intends to issue its final determinations around data confidentiality in June, with the first statistical publication under the new reporting standards released soon after.
If you have any feedback that you would like ASFA to consider in relation to the consultation, please forward it to Julian Cabarrus by close of business Friday 25 March.
ASIC/APRA meeting: seeking ASFA member feedback on topical issues
ASFA has regular liaison meetings with ASIC and APRA.
ASIC and APRA are interested in the views of our members, and whether there are any critical issues, with respect to the following matters:
- retirement income covenant
- retirement forecasting
- product holdings disclosure
- internal dispute resolution
- breach reporting
- employer defaults
- insurance in super
- performance test
- heatmaps
- merger activity
- fund expenditure
- best financial interest duty
- ASIC and APRA consultations (for example, strengthening financial resilience, sunsetting instruments, SPS 530, SPS 310).
If you have any feedback, comments or questions about any of these matters, or have any issues that you would like to raise, please forward them to Fiona Galbraith by close of business Friday 18 March.
Super Data Transformation: FAQs
APRA has updated its frequently asked questions (FAQs) in relation to the reporting standards issued under Phase 1 of its Superannuation Data Transformation project.
In the update, APRA has reportedly:
- made a correction to Historical Data FAQ 1.0
- published new Historical Data FAQs 1.6-1.10 and new FAQ SRS 605.0u.
Portfolio Holdings Disclosure: ASIC responses to industry questions
ASIC has provided responses to industry questions about portfolio holdings disclosure (PHD), to be transparent and to facilitate a consistent understanding of its approach towards compliance with the PHD requirements.
Under the PHD legislation, from 31 December 2021 trustees need to disclose on their fund website their investment holdings information as at 31 December and 30 June within 90 days.
Financial reporting and auditing requirements for superannuation funds: Bill introduced
The Government has introduced into Parliament a Bill to extend the current financial reporting and auditing requirements imposed on registrable superannuation entities (RSEs), to align them with those that apply to public companies.
In broad terms, the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 amends the Corporations Act 2001, Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Australian Securities and Investment Commission Act 2001 so the financial reporting obligations imposed on RSEs are consistent with those that apply to public companies and registered schemes under the Corporations Act. Currently, the requirements in relation to financial reporting and auditing for RSEs are primarily set out in the SIS Act, with some requirements in the prudential standards.
The Bill sets out the following reforms:
- Record-keeping: For income years beginning on or after 1 July 2023, RSEs must keep financial and accounting records for seven years. (The SIS Act currently requires records to be retained for five years.)
- Financial reporting: RSE licensees are currently required to provide APRA with specified information on the entity’s business operations for each year of income and each quarter, in accordance with superannuation reporting standards. The reforms will introduce an additional obligation on an RSE licensee to prepare and lodge with ASIC, for each financial year, financial reports comprising financial statements and notes for the entity and for each sub-fund, the directors’ declaration and a directors’ report.
- Appointment of auditors: An RSE licensee will be required to appoint an individual auditor (RSE auditor) to conduct an audit of a registrable superannuation entity. The auditor must comply with duties and obligations under both the Corporations Act and SIS Act. Under the reforms, the audit firm or company of which the RSE auditor is a member, employee or director will have obligations in respect of an audit of the entity, such as reporting suspected contraventions. (Currently, an RSE licensee must appoint an RSE auditor to conduct an audit of an RSE under the SIS Act. Audit companies and audit firms are not recognised and have no role or obligations in respect of the audit of an RSE.)
- Auditor reporting obligations: Currently, RSE auditors have an obligation to report suspected contraventions of the SIS Act and Regulations, prudential standards and the APRA data reporting regime. The reforms will impose additional reporting obligations on the audit firm or company of which the auditor is a member, employee or director. Individual auditors, members of an audit firm and directors of an audit company will also be required to report suspected contraventions of the Corporations Act to ASIC.
- Auditor independence: Individual auditors, members of an audit firm, audit companies and directors of an audit company will be subject to auditor independence requirements under the Corporations Act. (Currently, an RSE auditor is subject to auditor independence requirements in the prudential standards, which are substantially consistent with those in the Corporations Act.)
- Auditor rotation: Individual RSE auditors will be prohibited from playing a significant role in the audit of an RSE for more than five successive years. The directors of an RSE or ASIC will be able to extend this for up to an additional two successive years. Before ASIC may grant an approval, it must consult with APRA. (The current requirement is effectively the same, except that any exemption is granted by APRA.)
- Auditor transparency: the reforms will introduce a new requirement that an auditor of an RSE must prepare, lodge and publish an auditor transparency report if the auditor/entity conducts ten or more audits of specified types of entities, including RSEs, during the transparency reporting year.
The amendments are proposed to apply from 1 July 2023.
The Government consulted on an exposure draft of the Bill last August (see ASFA Action issue 819). The Bill as introduced has several key differences to the exposure draft, the most significant of which include:
- the commencement date has been deferred from 1 July 2022 to 1 July 2023
- a proposed requirement to lodge a financial report, directors’ report and auditor’s report for each half year has been removed
- a proposed requirement to prepare financial reports for each financial year and half year, which includes directors’ reports and financial statements, for each sub-fund has been removed.
Modernising business communications: Bill introduced
The Government has introduced into Parliament a Bill that seeks to establish a ‘global communications regime’ for documents sent under the Corporations Act 2001.
On 10 February, Parliament passed the Corporations (Meetings and Documents) Bill 2022 (Meetings and Documents Act) and it is currently awaiting Royal Assent. This will amend the Corporations Act to allow companies to sign and execute documents electronically or using wet-ink and companies, responsible entities of registered schemes and disclosing entities to send meetings-related documents electronically or in hard copy. See ASFA Action issue 841 in relation to these reforms.
On 17 February, the Government introduced into the House of Representatives the Treasury Laws Amendment (Modernising Business Communications) Bill 2022 (Modernising Business Communications Bill). This proposes amendments that would expand the scope of the reforms implemented by the Meetings and Documents Act so that:
- all documents which are required or permitted to be signed under the Corporations Act can be signed electronically or in wet-ink
- documents sent under specific chapters of the Corporations Act, other than those which are lodged with ASIC, the Registrar or the Takeovers Panel, can be sent in either hard copy or electronic form. This is limited to documents sent under particular chapters that, in essence, deal with registration, conduct and administration of a company as well as managed investment schemes and licensed trustee companies and the Asia Region Funds Passport. The provisions covered by this aspect of the reforms do not include Chapter 7 of the Corporations Act, which deals with regulation of financial services and products
- entities do not need to send any documents required under specified chapters where it knows that it does not have the correct contact details for the intended recipient. As with the above point, it should be noted that this relief is limited to documents sent under specified chapters of the Corporations Act and will not impact any specific rules in Chapter 7 dealing with disclosures in relation to financial products and services.
The Bill proposes that these global communications regime reforms would commence on the later of the day after Royal Assent or immediately after the commencement of related reforms in the Meetings and Documents Act.
The Bill also includes some amendments to various Treasury portfolio laws that require or permit notices to be published in newspapers, to replace these provisions with technology neutral rules. It also repeals several newspaper publication provisions, and associated provisions, which no longer serve any purpose. Of relevance to superannuation, the Bill amends section 142 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) which contains rules relating to the winding-up or dissolution of superannuation entities. Currently APRA is required to advertise the making of instruments made under the section in certain newspapers. Under the amendment, APRA will instead be required to publish notice of the making of the instruments in a manner that results in the notice being accessible to the public and reasonably prominent.
The Bill also makes some unrelated amendments to remove from the SIS Act redundant references to the registrable superannuation entity licensing transition period. As that period expired several years ago, these provisions are no longer needed.
Public sector superannuation: amending Bill – Your Future, Your Super
The Government has introduced into Parliament a Bill amending several existing pieces of legislation governing public sector superannuation, to reflect the Your Future, Your Super reforms (YFYS) relating to the annual performance test for MySuper products and superannuation fund ‘stapling’.
While the YFYS reforms applied effectively to some Commonwealth-run accumulation schemes, some other public sector superannuation arrangements — governed by the Parliamentary Superannuation Act 2004, the Superannuation Act 2005 and the Federal Circuit and Family Court of Australia Act 2021 — have complexities that prevented full alignment of treatment.
According to the explanatory memorandum, the Public Sector Superannuation Legislation Amendment Bill 2022 seeks to ensure that relevant Commonwealth superannuation arrangements are treated consistent with sector-wide reforms that already apply to most superannuation schemes run for the benefit of other Australians.
Superannuation co-contribution regulations remade
The Government has registered the Superannuation (Government Co-contribution for Low Income Earners) Regulations 2022. These replace the existing regulations supporting the co-contribution scheme, the Superannuation (Government Co-contribution for Low Income Earners) Regulations 2004, which are due to sunset (expire) on 1 April.
According to the explanatory material, the Regulations remake and improve the 2004 Regulations by omitting redundant provisions, simplifying language and renumbering provisions for ease of navigation. These changes do not affect the substantive meaning or operation of the provisions except in these limited cases:
- the definition of an eligible account is amended so it excludes those which only provide terminal medical condition benefits, in addition to the existing exclusion for accounts which provide only death or incapacity benefits. This change is consistent with the intention that the super co-contribution should not be paid to insurance only accounts, where the contribution would subsidise the payment of insurance premiums rather than contribute to increasing an individual’s retirement savings
- clarifying the operation of rules relating to where a Government co-contribution is to be directed in specific circumstances. The draft regulations ensure that only one item will apply in the event of multiple circumstances being applicable.
The regulations were previously released in draft for consultation in December-January (see ASFA Action issue 838).
APRA insight: compliance risk
APRA has published an Insight article on how regulated entities might approach managing compliance risk.
The article notes that:
- better practice for compliance risk management will continue to be a focus area for APRA, and is a key consideration across the Australian financial services sector for both industry participants and regulators.
- APRA wants to see regulated entities giving the same attention and prioritisation to compliance risk management that they give to cyber risk, operational risk management and other risk classes. Evidence has shown that compliance breaches can be extremely costly.
- while APRA has observed entities’ investment in people, systems and processes to support the management of compliance risk, high profile events and the subsequent failures of compliance monitoring practices highlight the continued importance of strong attention from senior leadership and boards.
- entities across all regulated industries should ensure they have a defined approach, established processes and clear accountability to manage compliance risk. APRA will continue to closely monitor entities’ management of compliance risk through its supervisory activities.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
