Issue 877, 8 November 2022
In this issue:
Financial contingency and resolution planning: consultation reminder
As reported in ASFA Action issue 868, APRA is consulting on proposed guidance to support two new cross-industry prudential standards on financial contingency and resolution planning.
APRA consulted on proposed prudential standards CPS 190 Financial Contingency Planning and CPS 900 Resolution Planning between December 2021 and April 2022. CPS 190 will ensure all APRA-regulated entities have plans for responding to severe financial stress, while CPS 900 will require large or complex entities to take pre-emptive actions, where appropriate, so that, in the event of their failure, APRA can resolve them with limited adverse impacts on the community and the financial system. APRA proposes that CPS 900 would apply from 1 January 2024, while CPS 190 would come into force from 1 January 2024 for banks and insurers and from 1 January 2025 for superannuation trustees. A final version of prudential standard CPS 190 is expected later this year, while the final CPS 900 will be released in the first half of 2023.
APRA is seeking feedback on draft prudential practice guides CPG 190 and CPG 900. These set out principles and examples of better practice to help entities meet their requirements under the new standards. APRA expects to finalise the guidance in the first half of next year.
If you have any feedback you would like ASFA to consider in relation to the draft prudential guidance, please forward it to Fiona Galbraith by close of business Friday 25 November 2022.
Superannuation Data Transformation phase 1: consultation on minor amendments
APRA has commenced consultation on what it describes as “minor amendments” to reporting standards introduced under Phase 1 of the Superannuation Data Transformation project.
The proposed amendments clarify investment option reporting and expenses reporting, reduce the frequency of reporting for some requirements and increase the time for submission of data for some requirements.
APRA’s consultation package includes a discussion paper and nine draft reporting standards:
- SRS 101.0 Definitions for Superannuation Data Collections
- SRS 251.0 Insurance
- SRS 332.0 Expenses
- SRS 605.0 RSE Structure
- SRS 606.0 RSE Profile
- SRS 705.0 Components of Net Return
- SRS 705.1 Investment Performance and Objectives
- SRS 706.0 Fees and Costs Disclosed
- SRS 550.0 Asset Allocation.
APRA is seeking feedback by close of business Friday 2 December.
Effectiveness and capability review of APRA
The Financial Regulator Assessment Authority (FRAA) has commenced its first review of the effectiveness and capability of APRA. This will be a “targeted assessment” of APRA’s supervision and resolution functions, focusing on superannuation. The scope of the review excludes matters that are under consideration in other reviews or consultations, such as the review of the Your Future, Your Super laws.
The FRAA has issued a consultation paper setting out a number of specific questions in relation to ASIC’s supervision and resolution functions in superannuation:
- are APRA’s supervisory priorities clearly communicated by APRA staff to the regulated population and external stakeholders?
- does APRA clearly communicate and implement its supervision activities, and are supervision activities appropriately targeted?
- how effective is APRA’s supervision in achieving APRA’s objectives? Are there any gaps in APRA’s supervisory activities in superannuation?
- to what extent does APRA have the appropriate organisational capabilities (including, people, data, technology, and systems) for detecting prudential risks, prioritising issues, and conducting its supervisory activities to achieve the right outcomes?
- what steps has APRA taken to effectively reduce the regulatory impost of its supervisory activities? How could APRA improve?
- how has APRA’s supervisory activities and the nature of its relationship with stakeholders changed following recent independent inquiries and reviews?
- how well is APRA’s resolution function communicated to and understood by the regulated population?
- how well has APRA prepared industry for the introduction of APRA’s resolution framework?
- how effective is APRA’s resolution function in promoting appropriate outcomes for members?
- to what extent does APRA have the appropriate organisational capabilities (including, people, data, technology, and systems) for achieving the right outcomes?
The FRAA has requested that, where possible, responses to the key questions below should be supported with data, examples and/or case studies from APRA’s supervision activities in superannuation.
The FRAA was established in response to recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (see ASFA Action issues 811 and 807 for background) and is tasked with reviewing and reporting on the effectiveness and capability of ASIC and APRA. The report from FRAA’s first review of ASIC was tabled in Parliament in August (see ASFA Action issue 866).
If you have any feedback you would like ASFA to consider in relation to the review, please forward it to Fiona Galbraith by close of business Friday 2 December.
Public Beneficial Ownership Register: consultation
As part of the Government’s program of reforms in relation to multinational tax integrity, Treasury is seeking comments on the design features for the first phase of a publicly available beneficial ownership register. A beneficial owner is a natural person who ultimately owns or controls an entity, legal vehicle, or asset. Beneficial owners are not always the legal owners of the entity, vehicle, or asset.
Treasury is seeking views on the proposed design of a first phase of the reform, in which specified unlisted entities regulated under the Corporations Act 2001 would be required to maintain accurate, uptodate and publicly accessible beneficial ownership registers. The relevant entities include proprietary companies, unlisted public companies, unlisted registered managed investment schemes, and unlisted corporate collective investment vehicles.
It is proposed to exempt regulated entities from identifying the beneficiaries, appointors, settlors and other members of a trust if the relevant trust is a registrable superannuation entity (RSE) regulated entities would only be expected to provide a RSE’s Name, Unique Superannuation Identifier, date of creation, and details of the RSE’s trustees.
Views are also sought on proposed amendments to the substantial holding notice and tracing notice regimes in the Corporations Act, which concern beneficial ownership disclosures with respect to listed entities.
If you have any feedback you would like ASFA to consider in relation to the consultation, please forward it to Andrew Craston by close of business Friday 2 December.
AUSTRAC updated guidance: consultation
AUSTRAC has released for consultation draft updated guidance on:
- enhanced customer due diligence (ECDD) and
- employee due diligence and training.
Businesses regulated by AUSTRAC must have procedures that detail when and how they conduct ECDD, to give the business a better understanding of higher risk customers and transactions and provide greater protection from criminal exploitation.
A reporting entity’s Anti-Money Laundering and Counter-terrorism financing program also must include employee due diligence procedures and money laundering and terrorism financing risk awareness training.
The draft guidance has been updated to provide further detail and additional examples to help reporting entities understand and undertake these obligations. The guidance is relevant to all businesses and industry sectors regulated by AUSTRAC.
The draft guidance is open for consultation until Thursday 15 December.
If you have any feedback you would like ASFA to consider in relation to the consultation, please forward it to Fiona Galbraith by close of business Friday 2 December.
Financial adviser registration requirement deferred
In ASFA Action issue 876, we reported the Government’s announcement that a requirement in relation to ASIC registration of financial advisers would be deferred from 1 January to 1 July 2023.
Subsequently, ASIC has published further information in relation to this announcement:
“Financial advisers will now need to be registered by 1 July 2023. It is important to note that the new registration requirement is separate to the pre-existing requirement for an Australian financial services (AFS) licensee to appoint a financial adviser that they authorise to the Financial Advisers Register.
ASIC previously announced that registration would be available through ASIC Connect from October 2022. However, in light of the announced delay ASIC has not opened the ASIC Connect portal for registration. ASIC now expects AFS licensees will be able to register their financial advisers via the ASIC Connect portal in the second quarter of 2023.
ASIC will publish guidance in advance of the ASIC Connect portal opening for registration. This guidance material will be accompanied by a set of webinars to assist industry comply with the new registration requirement.”
Leverage and risk in the superannuation system: CFR report
The Council of Financial Regulators (CFR), in conjunction with the ATO, has completed its second report to Government on leverage and risk in the superannuation system. The report focuses on limited recourse borrowing arrangements (LRBAs) which allow a superannuation fund to borrow to purchase an asset, with the lender’s rights limited to that asset if the loan defaults.
Consistent with the first report prepared in 2019, the current report finds that LRBAs are unlikely to pose a material risk to the superannuation system or broader financial system and recommends continued monitoring and reporting on an ‘as needed’ basis to ensure appropriate oversight of these risks. However, the report finds that LRBAs continue to be a significant risk to some individuals’ retirement savings. Given this, the report concludes that the Government may wish to further consider current policy settings, particularly in light of the 2014 Financial System Inquiry’s recommendation that LRBAs be prohibited.
The Council provided its report to the Treasurer in late September 2022.
In 2019, the then Government responded to the CFR’s first report on this issue by announcing it would not make any changes in relation to LRBAs. The then Government also requested the CFR to continue to monitor LRBAs (see ASFA Action issue 702).
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
