Issue 726, 4 November 2019
In this issue:
- PMIF: ASIC’s expectations about member communications
- Complaints handling: update on ASIC consultation
- APRA data collection solution: update
- Senate Committee inquiry on FinTech and RegTech
- ESG Factors in a Superannuation Context: new ASFA paper
PMIF: ASIC’s expectations about member communications
With trustees due to make communications by 1 December about the changes to default insurance cover as a result of the Treasury Laws Amendment (Putting Members’ Interests First) Act 2019 (PMIF Act), ASIC has outlined its expectations of trustees in relation to member communications.
The PMIF Act contains provisions making insurance opt-in for members under 25 or with account balances under $6,000 (see ASFA Action issues 721, 717 and 715). By 1 December, trustees are required to provide certain notices in writing to members potentially affected by the reforms, including those who have balances under $6,000 and hold insurance cover. Other disclosure obligations include updates to product disclosure statements and, potentially, significant event notices.
ASIC has emphasised that trustees’ communication plans should be holistic and centred around members. It has outlined a number of key considerations for trustees in communicating with members. Trustees must:
- include information about the importance and purpose of the reforms and make sure messages are balanced
- include a call to action for members to review the appropriateness of their insurance cover to their needs and to seek help if needed
- tailor the language and structure of the communication to the audience
- as far as possible, provide the information that members generally need to make an informed decision or suggest additional sources of assistance
- make sure any messages are not misleading.
Complaints handling: update on ASIC consultation
ASIC has indicated to ASFA that while it intends to publish an updated version of its s handling regulatory guide RG 165 in December 2019, “appropriate transitional timeframes” will be provided in relation to its revised requirements.
As reported in recent ASFA Actions, ASIC has been consulting on substantial proposed reforms to the complaints handling standards for its regulated entities, including superannuation fund trustees. ASIC recently provided an update regarding some aspects of its proposed requirements—relating to data collection and reporting—that will be temporarily postponed and removed from the update to RG 165 being published in December. ASIC has also issued legislative instruments continuing the current complaints handling standards until 30 June 2020. (See ASFA Action issue 723 for background.)
ASIC has now provided the following further update on its progress in relation to finalising RG 165:
The draft RG 165 that ASIC consulted on in CP 311 proposed transitional timeframes for some specific requirements, but proposed that other policy requirements would take effect immediately.
During the consultation process ASIC received strong feedback about the impracticability of commencing any of the RG 165 policy changes on the day of commencement. We have taken these views into account and we will be including appropriate transitional timeframes in the final guidance.
APRA data collection solution: update
APRA has issued an update on the implementation of its new data collection solution, to replace the current Direct to APRA (D2A) system.
An implementation plan issued in late July indicated that APRA’s anticipated timeframe for delivering its new data collection system had moved from March 2020 to some time later in 2020 (see ASFA Action issues 717, 704, 682 and 662 for background). This deferral was due to complexities identified in the design phase, additional scope, external dependencies as well as industry feedback. Since then, APRA has been continuing the technical build, receiving entity feedback about current and future submission methods, and engaging with reference and working groups about the transition to the new solution.
APRA has acknowledged that a key challenge for stakeholders is the complexity of migrating all existing collections in their current form (which may create significant burden for some entities as extensive resubmission of past returns may be required), while ensuring the benefits of the new solution are realised.
APRA’s latest update indicates it is exploring alternative implementation approaches for the new Data Collection Solution. As part of this, APRA is conducting workshops with industry to gather feedback on the impact of continued reporting through D2A beyond March 2020 and the preparation required for entities to change current processes for existing collections versus new and amended collections. APRA will confirm its implementation approach and revised timeline in early 2020, once it has completed this review.
The update also indicates that:
- APRA will ensure that D2A remains available after 31 March 2020 so entities can continue to meet their reporting obligations
- as AUSkey (the existing authentication method) will be decommissioned by 31 March 2020, entities will be required to obtain a myGovID and a machine credential (similar to AUSkey) in order to access D2A beyond this time. APRA will advise entities in coming months about the necessary changes to ensure continued reporting through D2A
- the test environment for the new solution is now expected to be released in mid-2020. APRA will provide at least three months for entities to test the new solution prior to
- APRA plans to collect more granular, detailed data in the future, enabled by the new data collection system. Some future collections will not be suitable for manual entry, and reporting entities will need to use file-based submission methods. Entities that are currently completing their submissions manually should take the opportunity to increasingly automate their reporting, as manual reporting will not be sustainable in the future.
Senate Committee inquiry on FinTech and RegTech
The Senate has established a committee to inquire into and report on matters in relation to financial technology (FinTech) and regulatory technology (RegTech).
The Select Committee on Financial Technology and Regulatory Technology will inquire and report on matters including:
- the size and scope of the opportunity for Australian consumers and business arising from FinTech and RegTech
- barriers to the uptake of new technologies in the financial sector
- the progress of FinTech facilitation reform and the benchmarking of comparable global regimes
- current RegTech practices and the opportunities for the RegTech industry to strengthen compliance but also reduce costs
- the effectiveness of current initiatives in promoting a positive environment for FinTech and RegTech start-ups.
The Committee is to present its final report on or before the Senate’s first sitting day in October 2020.
The committee has published an issues paper posing a number of questions in relation to its inquiry. In particular, the paper asks:
- Following the implementation of the consumer data right (CDR) in the banking sector, how quickly should government seek to implement CDR reforms in related financial sectors such as superannuation?
- What specific considerations need to be given to the implementation of CDR in the superannuation sector?
The deadline for submissions to the inquiry is 31 December 2019.
ESG Factors in a Superannuation Context: new ASFA paper
ASFA has published a new paper on environmental, social and governance (ESG) factors in a superannuation context.
The paper, Environmental, Social and Governance (ESG) Factors in a Superannuation Context, provides an overview of ESG factors in a superannuation context to help superannuation trustees decide what is best for their fund. Key findings include:
- there is still a significant gap in the depth and breadth of available data on ESG factors
- there is still a question of which factors would have the greatest impact on financial performance and the type of corporate reporting that would support investors’ analysis of ESG factors
- there is not a single approach to considering ESG factors that could be thought of as ‘best practice’
- most entities apply their own particular approach to incorporating ESG factors into their investment decision making.
The key takeaway is that superannuation funds need to consider ESG factors from a value perspective (that is, add to retirement savings outcomes) as opposed to a values perspective.
The ASFA secretariat developed the paper with the ASFA Economics and Investment Policy Council and representatives of member organisations.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
