Super Alert – 29 March 2019

This week’s Super Alert includes Government announcements for extra funding to the Federal Court, ASIC and APRA, updated guidance for trustees from APRA and the ATO, AFCA’s first newsletter and a range of Treasury consultations arising from the Royal Commission.

Establishment of Consumer Advisory Panel for AFCA and first newsletter

On 20 March 2019, AFCA announced that it had established a “Consumer Advisory Panel” which would “provide insights and analysis on strategic and policy issues, as well as highlight emerging issues facing consumers”.

On 21 March 2019, AFCA released its first newsletter called “The AFCA Times”. According to the newsletter AFCA has received “23,681 complaints, with over 6,100 in February alone”. The newsletter sets out AFCA’s views on the Royal Commission’s recommendations as well as a number of case studies.

Please click here and here to read more.

Government announces extra Federal Court funding – for financial sector criminal misconduct

On 23 March 2019, the Treasurer issued a media release announcing that extra funding of $35 million will be provided to the Federal Court because of its expanded jurisdiction in relation to corporate crime: “The expansion and funding will ensure that those who engage in financial sector criminal misconduct are prosecuted and face the appropriate punishment for their actions in a timely manner.”

The Treasurer explained that the “funding will support the appointment of two judges, 11 registry and support staff and the construction of new court facilities for the hearing of criminal proceedings”.

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Government announces extra funding for APRA and ASIC

On 23 March 2019, the Treasurer issued a media release announcing that extra funding of $550 million will be provided to APRA and ASIC as part of the Federal Budget. This amount will be split as $400 million to ASIC and $150 million to APRA in order to allow the regulators “to strengthen and intensify their approach to enforcement and take on expanded responsibilities to stamp out misconduct in our financial sector”.

The Treasurer explained that the funding will be used by ASIC to support:

• “Expanded regulation of financial services in accordance with the Royal Commission recommendations”;
• “Enhanced on-site supervision of larger institutions”;
• “ASIC’s expanded role as the primary conduct regulator for superannuation”; and
• “ASIC’s new role in administering a conduct-focused accountability regime”.

The Treasurer explained that the funding will be used by APRA to support the following measures:

• “Extend the Banking Executive Accountability Regime (BEAR) to all APRA-regulated entities including insurers and superannuation funds”;
• “Boost supervision intensity across APRA-regulated entities, including a strong focus on underperforming superannuation funds and members outcomes”; and
• “Enhance the supervisory framework for governance, culture and remuneration applying to all APRA-regulated entities, including through building internal technical expertise and accessing technical specialists outside of APRA, supporting APRA’s response to key areas of concern raised by Commissioner Hayne”.

Please click here to read more.

APRA draft guidance released for information security

On 25 March 2019, APRA released for consultation draft Prudential Practice Guide CPG 234 Information Security (Draft CPG). In an associated media release, APRA explained that the Draft CPG will “help industry embed” the new Prudential Standard CPS 234 (which comes into effect on 1 July 2019) and “replace the existing CPG 234 Management of Security Risk in Information and Information Technology”.

APRA will release a final version of the Draft CPG before 1 July.

Please click here and here to read more.

Contributions tax regulations remade

On 25 March 2019, the following regulations were registered on the Federal Register of Legislation.

• Superannuation Contributions Tax (Assessment and Collection) Regulations 2019; and
• Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Regulations 2019.

These regulations were due to sunset on 1 April 2019 but have been remade with minor amendments to the drafting and structure. This follows a Treasury consultation in relation to the changes. Further information is available in our Super Alert – 8 February 2019.

Please click here and here to read more.

ATO income stream guidance

On 22 March 2019, the ATO issued information guidance titled “Starting and stopping a super income stream (pension)” which is directed at APRA funds. The guidance sets out the ATO’s view on what a “super income stream” is and answers a number of frequently asked questions in relation to issues which arise with these products.

Please click here to read more.

APRA’s focus areas in 2019

On 27 March 2019, APRA issued a letter to all RSE licensees which sets out its “expectations and areas of focus for the year ahead”. APRA’s key focus areas will include:

• “Intensifying [APRA’s] focus on identifying underperforming funds to ensure timely and adequate action”;
• Ensuring entities are “meeting the new requirements of SPS 515” (on member outcomes);
• Working with trustees on “improving practices” in board capabilities and culture;
• “Updating its prudential requirements on executive remuneration”; and
• “Updating its guidance on the sole purpose test”.

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Draft Regulations for ending grandfathered conflicted remuneration

On 28 March 2019, Treasury released an exposure draft of the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Regulations 2019 (Draft Regulations) which seeks to “provide for the pass through to customers of the benefits of any previously grandfathered conflicted remuneration remaining in contracts after 1 January 2021”.

The Draft Regulations arise as result of the related Bill which was released by Treasury on 22 February 2019 and further information is in our Super Alert – 25 February 2019.

Submissions on the Draft Regulations close on 25 April 2019.

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Consultation paper for MySuper universal terms for insurance

On 28 March 2019, Treasury released a consultation paper titled “Universal terms for insurance within MySuper”. The consultation paper has been released in response to recommendation 4.13 from the Royal Commission which recommended that “Treasury, in consultation with industry, should determine the practicability, and likely pricing effects, of legislating universal key definitions, terms and exclusions for default MySuper group life policies”.

The key issues set out by Treasury include:

• “The merits of setting standards terms and definitions”;
• “Impact on premiums”;
• “Improving consumers’ understanding of insurance in superannuation”; and
• “Merits of prescribing minimum, maximum or set levels of cover”.

Submissions on the consultation paper close on 26 April 2019.

Please click here to read more.

Discussion paper for binding death benefit nominations to accommodate Aboriginal and Torres Strait Islander kinship structures

On 29 March 2019, Treasury released for consultation a discussion paper entitled “Superannuation binding death benefit nominations and kinship structures”. This discussion paper has been released in response to the Royal Commission’s suggestion that the government consider “the law surrounding the distribution of superannuation death benefits, Aboriginal and Torres Strait Islander peoples’ kinship structures, and how these kinship structures are accommodated elsewhere in the law”.

Submissions on the discussion paper close on 24 May 2019.

Please click here to read more.

This alert was written by Natalie Cambrell, Partner, Damian Tarulli, Special Counsel and Sanela Osmanovic, Associate.