Seven months after the final report from the financial services Royal Commission, the Government’s detailed plan for implementing the recommendations makes it clear the industry is facing a full agenda of consultation and legislation for the next two years and beyond.
The Royal Commission: the Government’s implementation roadmap
When the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report in February, the Government issued a response indicating it would take action on all the Commission’s recommendations.
Of the Commission’s 76 recommendations, 54 were directed to the Government and more than 40 require legislative change. The Government also made a number of additional commitments to address issues raised in the final report, several of which have specific relevance to superannuation.
In the months following the Commission’s report, the Government has implemented a handful of these recommendations and commitments, including:
- prohibiting ‘treating’ of employers (recommendation 3.6) and increasing civil penalties for breach of covenants and like obligations (recommendation 3.7) – these changes were implemented as part of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019, which received Royal Assent in April
- reviewing the merits of universal terms for MySuper products (recommendation 4.13) – the Government conducted consultation on these reforms in March-April and is now considering its response
- expanding AFCA’s remit to consider past disputes (additional commitment in response to Recommendation 7.1) – AFCA’s remit was extended to consider financial complaints dating back to 1 January 2008 and AFCA commenced receiving legacy complaints from 1 July
- undertaking an APRA capability review (recommendation 6.13) – a capability review of APRA was completed in June and the responses of the Government and APRA have been published
- Consulting on superannuation binding death benefit nominations for Indigenous people (additional commitment) – consultation was undertaken in March-May and the Government is now considering its response.
In mid-August, the Government released a detailed ‘roadmap’ setting out its plans to implement the remaining recommendations and commitments.
The roadmap notes that important reforms to ‘staple’ new workforce entrants to a single default superannuation account will be considered in the context of the findings and recommendations of the Productivity Commission’s report Superannuation: Assessing Efficiency and Competitiveness.
Other major recommendations and commitments with particular relevance to superannuation will be progressed according to the following timeline:
|Strengthen ASIC’s powers in relation to search warrants, telecommunications interception, licensing and banning of people from the financial sector (additional commitments to implement recommendations from the ASIC Enforcement Review Taskforce)
|Legislation is expected to be consulted on and introduced by the end of 2019.
|Prohibit trustees of registrable superannuation entities (RSEs) from taking on any other role or office (recommendation 3.1)
Ban deduction of advice fees from MySuper accounts (recommendation 3.2)
Limit deduction of advice fees from choice superannuation accounts (recommendation 3.3)
Ban hawking of superannuation products (recommendation 3.4)
Adjust APRA’s and ASIC’s roles in superannuation – including setting general principles for co-regulation of superannuation and making ASIC the conduct regulator for superannuation (recommendations 3.8, 6.3, 6.4, 6.5)
Strengthen financial regulators – including statutory obligations for APRA and ASIC to co-operate and share information and a new oversight authority for APRA and ASIC (recommendations 6.9, 6.14)
Improve the ASIC breach reporting regime, as recommended by the ASIC Enforcement Review Taskforce (recommendation 7.2)
|Legislation is expected to be consulted on and introduced by 30 June 2020.
|Introduce a compensation scheme of last resort (recommendation 7.1)
Extension of the Banking Executive Accountability Regime (BEAR) to RSE licensees and split administration of the BEAR between APRA and ASIC (recommendations 3.9, 6.6, 6.7)
|Legislation is expected to be consulted on and introduced by the end of 2020.
|Increase AFCA’s role in remediation programs (additional commitment in response to Recommendation 7.1)
|Legislation is expected to be introduced by mid-2021
The Treasurer has indicated there are currently 24 streams of work underway in Treasury that are progressing the Government’s commitments to the Royal Commission. It is anticipated that giving effect to the Implementation Plan will take up 75 per cent of Treasury’s legislative agenda over the next year.
In other noteworthy regulatory developments:
- Treasury has released a discussion paper on the design and operation of the financial institutions supervisory levy. The levy was introduced in 1998 to recover most of the operational costs of APRA, as well as specific costs incurred by certain Commonwealth agencies and departments, from regulated entities including superannuation fund trustees. Since its introduction, the scope of the levy has expanded to include a broader range of activities relating to the financial services sector. Treasury is now seeking views on the design and operation of the levy, to inform future consideration of the levies and changes to legislation that underpin the levies framework. This consultation is separate to the annual ‘Proposed Financial Institutions Supervisory Levies’ paper released each year. Submissions close on 13 September.
- ASIC has commenced a consultation on proposed guidance regarding new obligations in relation to whistleblower policies. A range of entities, including corporate trustees of RSEs, must implement a whistleblower policy and make it available to their officers and employees by 1 January 2020. This requirement was introduced as part of the reforms to the corporate and financial sector whistleblower regime that were implemented by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 and commenced on 1 July. As part of its consultation, ASIC has released a draft Regulatory Guide, explaining how companies can establish, implement and maintain a whistleblower policy. The guide covers the information that entities must include in their policy, including how they will support and protect whistleblowers and handle and investigate whistleblower disclosures. ASIC is seeking comments by 18 September 2019. ASIC has also issued Information Sheet 238 Whistleblower rights and protections and Information Sheet 239 How ASIC handles whistleblower reports to help entities and consumers understand the new regime.
- The Government has made the Treasury Laws Amendment (Deferring Extension of SuperStream to Self Managed Superannuation Funds) Regulations 2019, deferring the application of SuperStream to SMSF rollovers from 30 November 2019 to 31 March 2021. The extension of SuperStream to SMSF rollovers was initially announced in early 2018 and amending regulations registered in late September. The Government announced in its May 2019 Budget that it would defer the extension as part of a measure to amend SuperStream to incorporate electronic release authorities.
- APRA has released an updated implementation plan for its new data collection solution, which will replace the current Direct to APRA (D2A) system. The implementation plan provides guidance to the industry about the changes and how to prepare for the new solution. The key updates relate to:
- extended project and implementation timeframes. In particular, the ‘go live’ date for the new data collection solution has moved from March 2020 to later in 2020. APRA will provide an update on the revised implementation timelines by October
- detail on what is changing with the new solution
- technical specifications
- guidance for entity readiness