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Issue 729, 29 November 2019 
In this issue: 

 

Fee and cost disclosure: updated RG 97 released 

ASIC has finalised its fee and cost disclosure requirements for superannuation funds and managed investment schemes, with the release of updated regulatory guidance and two legislative instruments. 

The updated guidance—contained in a revised Regulatory Guide 97 Disclosure of fees and costs in PDSs and periodic statements (RG 97)follows a long-running review of disclosure requirements, including an analysis by independent expert Darren McShane (see ASFA Action issue 696 for background). 

The main changes to fees and costs disclosure include: 

Modification of the legislation has been done by way of two legislative instruments, ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070 and ASIC Corporations (Amendment) Instrument 2019/1071, including a consolidated version of Schedule 10 of the Corporations Regulations 2001. 

ASIC has indicated that the regulatory guidance and associated legislative instrument have been drafted to make the regime more practical for industry and promote compliance by issuers with their legal obligations. The guidance has separate sections dealing with superannuation and managed investment products. 

The costs categories that need to be counted in disclosed amounts have been clarified, including confirming that some categories that are hard to measure accurately and consistently, and have limited value for users, need not be included (for example, implicit market costs). 

The new disclosure requirements in updated RG 97 will apply to all PDSs issued on or after 30 September 2020. 

Periodic and exit statements with reporting periods commencing from 1 July 2021 must comply with the new requirements, however, an early opt-in is available for reporting periods commencing from 1 July 2020. 

The existing requirements under ASIC Class Order 14/1252 and the transitional version of RG 97 will continue to apply until the end of the transition period. The updated version of RG 97 provides clearer guidance about existing fees and costs disclosure requirements that have not changed. 

Separately, ASIC will undertake focused work on fees and costs disclosure on platform arrangements in 2020 and will work with industry bodies to clarify how financial advisers should use fees and costs information when giving advice. 

ASIC has indicated it will monitor fees and costs disclosure going forward and consider taking action where it finds misconduct. 

In addition to the updated RG 97 and legislative instruments, ASIC has released: 

 

 

Choice of fund: extension to workplace determinations and enterprise agreements 

The Government has introduced into Parliament a Bill to ensure employees under new workplace determinations or enterprise agreements have an opportunity to choose the superannuation fund for their compulsory employer contributions. 

The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 reintroduces amendments to the Superannuation Guarantee law that were previously contained in the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017. That Bill lapsed when Parliament was prorogued for the election earlier this year. 

Under the amendments: 

The amendments are intended to apply only to new workplace determinations and enterprise agreements made on or after 1 July 2020. 

The Bill has been referred to the Economics Legislation Committee for inquiry and report by 21 February. If you have any feedback you would like ASFA to consider in relation to the Bill, please forward it to Ross Clare by close of business Friday 10 January. 

 

 

Member outcomes: APRA guidance on business performance reviews 

APRA has finalised guidance in relation to the business performance reviews that registrable superannuation entity (RSE) licensees are required to undertake as part of the new member outcomes requirements. 

New prudential practice guide SPG 516Business Performance Review provides guidance on undertaking APRA’s new requirements for an annual Business Performance Review under Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515), and also the new legislated member outcomes assessment. 

SPS 515, and the guidance issued to support it—new SPG 516 and SPG 515 Strategic and Business Planning—are intended to facilitate RSE licensees’ rigorous assessment of their performance and the outcomes they deliver to members, as well as helping them identify areas needing improvement. SPS 515, SPG 515 and SPG 516 all commence on 1 January 2020 (see ASFA Action issue 719 for background). 

APRA has also written to all RSE licensees to provide its response to submissions made on an earlier draft of SPG 516, addressing the following areas: 

 

 

Stronger regulators: implementation of ASIC Enforcement Review Taskforce report 

The Government has introduced into Parliament a bill to implement 16 recommendations from the ASIC Enforcement Review Taskforce Report (see ASFA Action issue 668 for background). 

The Bill implements recommendations from the ASIC Enforcement Review Taskforce Report to: 

Some of the proposed amendments will: 

The amendments are intended to apply the day after the Act receives Royal Assent. 

 

 

Family law super splitting: extension to de facto couples in Western Australia 

The Commonwealth Government has introduced into Parliament a bill to allow separated de facto couples in Western Australia (WA) to split their superannuation interests as part of their property settlements. Separated de facto couples in all other states and territories are already able to access the family law superannuation splitting regime. 

The Commonwealth Family Law Act 1975 (FL Act) was extended in 2008 to cover the breakdown of de facto relationships, however the amendments relied on each state having referred to the Commonwealth the constitutional power to legislate in respect of financial matters arising out of the breakdown of such relationships. 

Over subsequent years, all states made a full referral of power for this purpose except for WA, which sought to limit the referral of power so the Commonwealth could legislate only in relation to superannuation interests and not in relation to other matters. The Commonwealth had not acted on this limited referral, therefore separated de facto couples in WA have not been able to access the superannuation splitting regime. In October 2018 the Commonwealth Government decided to accept and implement a narrow referral of power from WA. (See ASFA Action issue 689 for background.) 

The Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019 contains amendments that will enable separating de facto couples in WA to access the superannuation splitting regime. All other aspects of property splitting for separated WA de facto couples will continue to be dealt with under WA law rather than the Commonwealth FL Act. 

The provisions to achieve this will be contained in a discrete Part of the FL Act, separate to the existing superannuation splitting rules. This essentially involves replication of many of the existing provisions but is intended to reduce the risk of inadvertently impacting the application of the existing provisions in the FL Act to de facto couples in states other than WA, and to confine the WA provisions in a single place to aid usability and comprehension. 

 

 

Ending grandfathered remuneration for financial advice 

The Government has made regulations supporting recent legislation requiring financial advisers to move away from grandfathered conflicted remuneration arrangements for financial advisers. 

The ending of grandfathered conflicted remuneration forms part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. To date this response has involved the passage of the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Act 2019and an ASIC review (see ASFA Action issues 719, 700 and 697). 

The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Regulations 2019 amend the Corporations Regulations 2001 to: 

The Regulations will take effect from 1 January 2021. 

 

 

ASIC and APRA: updated memorandum of understanding 

ASIC and APRA have published an updated Memorandum of Understanding (MOU), committing to strengthen engagement, deepen cooperation and improve information sharing. 

The updated MOU follows on from the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. APRA and ASIC are also working closely with the Government on the legislative changes required to implement these recommendations. 

ASIC Chair James Shipton said the updated MOU “facilitates more timely supervision, investigations and enforcement action and deeper cooperation on policy matters and internal capabilities”. APRA Chair Wayne Byres said enhanced cooperation reinforced the twin peaks model of regulation that has operated in Australia for more than 20 years. 

 

 

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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