Issue 561, 24 March 2015
In this issue:
- ASFA puts plaintiff law firms on notice regarding insurance claims process
- APRA letter to trustees on managing conflicts of interest
- APRA letter to trustees regarding deferral of reporting standard SRS 534.0
- ASIC and APRA letter to superannuation trustees that are dual-regulated entities
- New chairperson for SCT needed
ASFA puts plaintiff law firms on notice regarding process for insurance claims
ASFA has written to all state and territory law societies, as well as to the Australian Lawyers Alliance (formerly the Australian Plaintiff Lawyers Association), to express our concern, on behalf of the industry, regarding the conduct of some legal practitioners in relation to death and total and permanent disablement (TPD) claims.
Specifically, ASFA has raised concerns regarding a number of cases over the past few years involving law firms commencing proceedings for a TPD benefit against superannuation funds where no prior claim had been made by the member.
A copy of the letter to the New South Wales Law Society is available here.
The letters advise the law societies and the Australian Lawyers Alliance of the proper process for making an insurance claim. The letter also informs them of the potential course of action open to superannuation trustees where the proper process is not followed, which includes:
- having such prematurely-issued proceedings struck out on the basis that the proceedings were commenced without proper basis
- seeking orders for costs against the law firm if appropriate
- drawing the conduct of the matter to the attention of the relevant professional standards body to take action against any law firm involved in such conduct.
ASFA recommends that trustees consider whether they should take the above action if they receive an insurance claim from a law firm in respect of a member at the same time as being issued with a notice regarding the commencement of legal proceedings (or an indication that legal proceedings may be imminent if the claim is not immediately paid).
ASFA would also appreciate being made aware of any future occurrence of such action by law firms, so that we can consider how best to further address this issue.
If you have any questions regarding this matter, please contact Jon Echevarria.
APRA letter to trustees on managing conflicts of interest
APRA has written to all trustees of registrable superannuation entities (RSEs) to highlight areas of improvement for the industry in relation to implementation of Prudential Standard SPS 521 Conflicts of Interest (SPS 521).
As part of a ‘thematic review’, conducted during 2014, APRA reviewed the implementation of SPS 521 by 37 RSE licensees from all segments of the industry (industry, retail, corporate and public sector), and sought to identify areas of better practice and potential areas for improvement.
The review highlighted that there is a wide range of practice in relation to conflicts management across the superannuation industry and APRA identified some positive developments and examples of good practice in the management of conflicts by RSE licensees. Overall, however, the review indicated that implementation of the requirements is still in its early stages and further steps need to be taken by many RSE licensees to improve their conflicts management practices.
The key areas for further development in the implementation of SPS 521 include:
- identification of conflicts
- implementation of sound governance structures
- clarity of policies and procedures and embedding of roles and responsibilities
- robust related-party dealings.
While the thematic review indicated that there are some examples of sound conflicts management practices across the industry, APRA’s view is that there is significant room for improvement.
APRA’s responsible supervisors will follow up with RSE licensees to ensure that any specific issues arising from the review are addressed in a timely manner. Responsible supervisors will also continue to focus on conflicts management issues as part of future supervision activities.
The letter to trustees is available on the APRA website.
APRA letter to trustees regarding deferral of reporting standard SRS 534.0
APRA has written to superannuation trustees regarding the deferral of reporting obligations under Reporting Standard SRS 534.0 Derivative Financial Instruments (SRS 534.0) for the year of income 2014/15.
APRA has decided to defer the reporting of SRS 534.0 because of issues associated with reporting a number of the data items required by SRS 534.0, as well as the costly changes that would likely be required to systems and processes solely in order to collect the data.
As a result of this deferral, trustees will not be required to report SRS 534.0 to APRA until after the consultation period has been completed, and a revised SRS 534.0 has been released.
The letter to trustees dated 12 March 2015 can be downloaded from the APRA website.
ASIC and APRA letter to superannuation trustees that are dual-regulated entities
On 30 January 2015, ASIC and APRA issued a joint letter to superannuation trustees that are dual-regulated entities, regarding changes to their regulatory requirements.
Currently, superannuation dual-regulated entities (SDREs) are exempt from obligation under the Corporations Act 2001 (Corps Act) to have in place adequate resources and risk management systems for non-superannuation related business activities.
However, as a result of amendments made on 26 June 2013, by the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Act 2013, from 1 July 2015, the current exemptions cease to have effect on SDREs.
Therefore, from 1 July 2015, SDREs will need to meet the requirements in section 912A(1)(d) of the Corps Act, to have adequate risk management systems, regardless of whether the trustee is required to comply with similar obligations under the Superannuation Industry (Supervision) Act 1993.
The joint letter outlines ASIC’s requirements in relation to both financial resources and risk management, and is available on the APRA website.
New chairperson for SCT needed
Members have raised their concerns with ASFA regarding the Superannuation Complaints Tribunal (SCT), and its possible inability to perform key and fundamental functions as it has yet to fill the role of chairperson, following the recent departure of the acting chairperson, Jocelyn Furlan.
ASFA has taken those concerns to the government and requested that urgent attention be given to the appointment of a new chairperson.
