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Issue 719, 30 August 2019 
In this issue: 

 

Member outcomes and business performance review: final APRA requirements and new consultation 

APRA has finalised prudential requirements for how registrable superannuation entity (RSE) licensees assess the outcomes they are delivering to their members and has commenced a consultation on additional guidance to support the new requirements. 

In April-May this year, APRA undertook consultation to clarify how its prudential standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) would interact with the outcomes assessment legislated by the Government in theTreasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Act 2019(see ASFA Action issues 707, 704, 698 and 694 for background). 

APRA has now published the final version of SPS 515, along with its response to the submissions received as part of that consultation process, and a finalised prudential practice guide SPG 515Strategic and Business Planning. 

APRA has also released a draft prudential practice guide SPG 516 Business Performance Review for consultation, with the final version expected to be published in December. 

Deputy Chair Helen Rowell has indicated that SPS 515 will require all RSE licensees to perform an annual Business Performance Review, designed to complement the requirements of the legislated outcomes assessment. Where the legislated assessment requires licensees to assess member outcomes at a product level at a point in time, APRA’s Business Performance Review also requires licensees to assess outcomes across a broader range of metrics for different member cohorts. Further, licensees must consider whether they will continue to deliver quality outcomes for all their members into the future and take action if they identify areas needing improvement. SPS 515 will come into force from 1 January 2020. 

With APRA also strongly focused on weeding out underperforming funds, Mrs Rowell confirmed APRA intended to start publishing additional information on superannuation performance by the end of the year. Starting with MySuper products, APRA plans to publish assessments of performance based on a range of measures and benchmarks in four key areas: investment returns, fees and charges, sustainability and (in due course) insurance. APRA is developing a heat map or traffic light approach that will assist stakeholders to form an overall view of the performance of each MySuper product against the measures and benchmarks used. This approach will be expanded to include choice products over time, as additional, more reliable data becomes available. 

If you have any feedback you would like ASFA to consider in relation to the draft prudential guide SPG 516, please forward it to Byron Addison by close of business Thursday, 3 October. 

 

 

Remuneration prudential standard: reminder about APRA consultation 

As reported in ASFA Action issue 717, APRA is consulting on proposed new prudential requirements for its regulated entities—including superannuation funds—in relation to remuneration. 

Among the key reforms, APRA is proposing to: 

If you have any feedback that you would like ASFA to consider including in its response to APRA, please forward it to Maggie Kaczmarska by close of business Friday, 20 September. 

 

 

Naming of firms in published determinations: AFCA rule change approved 

ASIC has approved changes to the governing rules of the Australian Financial Complaints Authority (AFCA), to allow AFCA to name financial firms—including APRA-regulated superannuation funds—in its published determinations. 

Currently, AFCA’s Rules require it to publish its determinations in a form which does not identify the parties to the complaint. AFCA applied for approval to change its Rules to enable identification of firms following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

As this constituted a ‘material change’ to the AFCA Rules, ASIC’s approval was required. ASIC has indicated that in its view, naming firms in determinations can help identify conduct or market problems within firms or affecting specific products or services, as well as highlighting where firms have done the right thing. It will also enhance transparency and accountability of firms’ performance in complaints handling and of AFCA’s own decision-making. 

Consumers who are party to a complaint will continue to be anonymised in all published determinations. 

The update to AFCA’s Rules is expected to become available on its website shortly. To support the new Rules, AFCA will issue updated operational guidelines setting out examples of the circumstances in which a determination naming a financial firm would not be published, for example where naming may expose confidential information about a firm’s systems or policies. 

AFCA has indicated it is working with ASIC to determine the start date for the naming of financial firms, and will provide further updates in due course. 

 

 

Ending grandfathered remuneration for financial advice: ASIC review 

ASIC has announced that it is investigating the progress of transition away from grandfathered conflicted remuneration arrangements for financial advisers. 

The investigation was directed by the Treasurer following the Government’s commitment to end the practice by 1 January 2021. The investigation will review the steps taken by industry participants from 1 July 2019 until the 2021 deadline. ASIC will also investigate any impediments to this transition, and the extent to which benefits are being passed on to affected clients. 

ASIC will analyse the information from both reviews and report to the Treasurer by 30 June 2021. The report will also be released publicly. ASIC expects to provide an update on its investigation to the Treasurer and industry as appropriate during the review period. 

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 (see ASFA Action issues 700 and 697). As part of this process, the Government has also introduced into Parliament the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019, to: 

 

 

Regulators’ super priorities: ASIC and APRA corporate plans 

ASIC and APRA have released their latest corporate plans, outlining their change agenda and regulatory priorities, including for superannuation funds. 

ASIC’s corporate plan for 2019-20 to 2022-23 outlines seven key priorities, as follows: 

  1. high-deterrence enforcement action 
  2. prioritising the recommendations and referrals from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry 
  3. delivering as a conduct regulator for superannuation 
  4. addressing harms in insurance 
  5. improving governance and accountability 
  6. protecting vulnerable consumers 
  7. addressing poor financial advice outcomes. 

ASIC has indicated its planned surveillance activity for superannuation will pay particular attention to misconduct in superannuation funds, including: 

APRA‘s corporate plan 2019-2023 identifies four areas of strategic focus aimed at strengthening outcomes for the Australian community: 

  1. maintaining financial system resilience 
  2. improving outcomes for superannuation members 
  3. improving cyber-resilience across the financial system 
  4. transforming governance, culture, remuneration and accountability across all regulated financial institutions. 

In terms of improving outcomes for superannuation members, APRA has outlined two key outcomes, involving improved: 

To achieve this objective, APRA will: 

 

 

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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