Super Alert – 31 January 2020 

31 January 2020

Welcome to the first Super Alert of 2020. We hope you enjoy this edition and those to come through the year. The year ahead will no doubt be jam-packed again with legal and regulatory developments.

This edition covers news from late December 2019 to late January 2020. Highlights of this period include a number of releases from Treasury to give effect to recommendations made in the Royal Commission’s Final Report, including a proposal paper on the Financial Accountability Regime.

Superannuation Data Transformation project – APRA releases second consultation package

On 19 December 2019, APRA released its second consultation package in relation to the Superannuation Data Transformation project (see our Super Alert of 15 November 2019 in relation to phase 1). The new papers released were:

  • Topic Paper 2: Performance, which ‘will facilitate the assessment of member outcomes and performance for choice products, investment menu and investment options’; and
  • Topic Paper 3: Member Accounts, which ‘will provide more granular information on member demographics data’.

The consultation period closes on 14 February 2020.

Please click here and here to read more.

ASIC’s Whistleblower Policy reminder

On 20 December 2019, ASIC issued a media release reminding trustees of superannuation entities that ‘they are required to have a whistleblower policy and make it available to their officers and employees by 1 January 2020’.

Please click here to read more.

Discussion paper in relation to compensation scheme of last resort

On 20 December 2019, Treasury released a discussion paper requesting industry views on the establishment of a compensation scheme of last resort (CSLR). Recommendation 7.1 of the Royal Commission’s Final Report recommended that this scheme be established as advised by the Government’s September 2017 review of the financial system external dispute resolution and complaints framework.

The paper notes the Government’s intention to establish the scheme ‘to ensure that consumers and small businesses receive compensation where a financial service provider is found to have engaged in misconduct and the provider is unable to pay’. One of the consultation questions is: ‘What is the appropriate coverage for the CSLR, beyond the provision of personal advice?’

The consultation period closes on 7 February 2020.

Please click here and here to read more.

Exposure draft legislation – ASIC/APRA co-ordination and information sharing

On 24 December 2019, Treasury released exposure draft legislation in relation to co-operation and information sharing between ASIC and APRA.

The legislation was released as a result of recommendations from the Royal Commission’s Final Report including Recommendation 6.9 stating that APRA and ASIC should: ‘co-operate with the other…, share information to the maximum extent practicable…[and] notify the other whenever it forms the belief that a breach in respect of which the other has enforcement responsibility may have occurred’.

The consultation period closed on 24 January 2020.

Please click here to read more.

ATO updates industry roadmap

On 14 January 2020, the ATO updated its ‘Superannuation changes industry road map’ which now details the changes up to March 2021 which will impact the superannuation industry.

Please click here to read more.

APRA’s 2019 ‘Year in Review’ publication

On 17 January 2020, APRA released its new annual publication titled ‘APRA 2019 Year in Review – Safeguarding Australia’s financial wellbeing’. This publication ‘outlines APRA’s perspective on the financial environment and the key issues that have faced the banking, insurance and superannuation sectors in 2019’.

Among other things, APRA:

  • Confirmed that ‘improving outcomes for superannuation members’ is one of its top four strategic priorities; and
  • Re-iterated that ‘[e]ffective from 1 January 2020, SPS 515 requires RSE licensees to annually review their performance in delivering outcomes to members, against relevant benchmarks and peers’.

Please click here and here to read more.

Financial Accountability Regime (FAR) proposal paper

On 22 January 2020, Treasury released for consultation a proposal paper in relation to the ‘Financial Accountability Regime’ (FAR). This follows from an announcement by the Government in February last year shortly after the release of the Royal Commission’s Final Report that it would implement the recommendation to extend the ‘Banking Executive Accountability Regime’ (BEAR) to all APRA regulated entities and provide joint administration to ASIC as the conduct regulator.

The proposal paper outlines the Government’s proposed model and seeks feedback from the industry.

Some of the proposed changes under the FAR include:

  • ‘FAR entities [will be] split into core and enhanced compliance for accountability statements and map obligations.’ An RSE licensee will be categorised as an enhanced compliance entity where the ‘combined total assets of all RSEs under the trusteeship of a given RSE licensee’ is greater than $10 billion;
  • There will be an ‘[i]ncreased number of roles and responsibilities in [the] list prescribed by regulators for the purposes of defining an accountable person’;
  • ‘FAR entities will be required to defer 40 per cent of the variable remuneration of all of their accountable persons for at least four years, if the amount that would be deferred under the FAR is greater than $50,000’; and
  • ‘Larger maximum penalties will apply under the FAR, to align the penalty framework with recent amendments to the Corporations Act, ASIC Act, Credit Act and Insurance Contracts Act.’

The consultation period closes on 14 February 2020.

Please click here and here to read more.

APRA publishes policy and supervision priories

On 30 January 2020, APRA released documentation setting out its policy and supervision priorities for the next 12 to 18 months, which includes:

  • ‘maintaining financial resilience, including through increased focus on recovery and resolution planning and stress testing’;
  • ‘conducting a range of GCRA-related supervisory reviews and deep dives, and using entity self-assessments to drive greater accountability’;
  • ‘encouraging underperforming superannuation funds to urgently improve member outcomes or exit the industry’; and
  • ‘more closely assessing institutions’ capability to deal with emerging and accelerating risks, such as cyber-security and climate change’.

Please click here to read more.

This article was written by Natalie Cambrell, Partner, Sanela Osmanovic, Associate and Joseph Cheung, Solicitor.

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