This week’s Super Alert notes Treasury’s release of exposure draft legislation to implement several recommendations from the Royal Commission, as well as the ATO’s announcement in relation to indexation of the transfer balance cap.
APRA publishes annual superannuation bulletin
On 31 January 2020, APRA released its annual Superannuation Bulletin for the 2018/19 financial year which provides ‘information to assess the overall performance of the superannuation system’. According to APRA, there was a total of $2.88 trillion superannuation assets as at 30 June 2019.
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Exposure draft legislation released to implement 22 Royal Commission recommendations
On 31 January 2020, Treasury released for public consultation a number of pieces of exposure draft legislation which together propose to implement 22 of the Royal Commission’s recommendations and some from the ASIC Enforcement Review Taskforce, including the following affecting superannuation funds:
- Enforceability of financial services industry codes – Recommendation 1.15 – ‘The law should be amended to provide that ASIC’s power to approve codes of conduct extends to codes relating to all APRA-regulated institutions…[and] that industry codes of conduct approved by ASIC may include ‘enforceable code provisions’, which are provisions in respect of which a contravention will constitute a breach of the law’;
- Reference checking and information sharing, breach reporting and remediation – Recommendations 2.7, 2.8 and 2.9 – All AFSL holders should be required to:
- ‘give effect to reference checking and information-sharing protocols for financial advisers’;
- ‘report ‘serious compliance concerns’ about individual financial advisers to ASIC on a quarterly basis’; and
- when they detect that a financial adviser has engaged in misconduct, ‘make whatever inquiries are reasonably necessary to determine the nature and full extent of the adviser’s misconduct…[and] tell affected clients and remediate those clients promptly’.
- Breach reporting and remediation – Recommendation 7.2 – ‘The recommendations of the ASIC Enforcement Review Taskforce made in December 2017 that relate to self-reporting of contraventions by financial services…licensees should be carried into effect’;
- RSE licensees should hold no other role – Recommendation 3.1 – ‘The trustee of an RSE should be prohibited from assuming any obligations other than those arising from or in the course of its performance of the duties of a trustee of a superannuation fund’;
- Advice fees in superannuation – Recommendations 3.2 and 3.3 – ‘Deduction of any advice fee (other than for intra-fund advice)…should be prohibited’ and in relation to superannuation accounts other than MySuper accounts, advice fees ‘should be prohibited unless the requirements about annual renewal, prior written identification of service and provision of the client’s express written authority…in connection with ongoing fee arrangements are met’;
- No hawking of financial products – Recommendation 3.4 – ‘Hawking of superannuation products should be prohibited. That is, the unsolicited offer or sale of superannuation should be prohibited except to those who are not retail clients and except for offers made under an eligible employee share scheme’;
- Superannuation regulator roles – Recommendations 3.8, 6.3, 6.4 and 6.5 – ‘The roles of APRA and ASIC in relation to superannuation should be adjusted to [make clear] that APRA…is responsible for establishing and enforcing Prudential Standards and practices designed to ensure that…financial promises made by superannuation entities APRA supervises are met within a stable, efficient and competitive financial system…[and] ASIC’s role in superannuation primarily concerns the relationship between RSE licensees and individual consumers…ASIC should be given the power to enforce all provisions in the SIS Act that are, or will become, civil penalty provisions..[t]here should be co-regulation by APRA and ASIC of these provisions…’;
- Financial Regulator Assessment Authority – Recommendation 6.14 – ‘A new oversight authority for APRA and ASIC, independent of Government, should be established…to assess the effectiveness of each regulator in discharging its functions and meeting its statutory objects’; and
- Implementation of ASIC Enforcement Review Taskforce directions power recommendation – The ASIC Enforcement Review Taskforce recommended that ASIC be provided with a power to direct AFS licensees to address or prevent risks to consumers if ASIC suspects that the licensee has, may or will breach a financial services law.
Public submissions on the exposure draft Bills and Regulations close on 28 February 2020.
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ATO announces no indexation of transfer balance cap
On 31 January 2020, the ATO advised that the transfer balance cap will not be indexed on 1 July 2020 as the All Groups CPI figure for December 2019 was not greater than 116.9. The ATO expects that indexation of the transfer balance cap will occur on 1 July 2021.
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Bill to implement ASIC Enforcement Review Taskforce Report passes Parliament
On 6 February 2020, the Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Bill 2019 passed both houses of Parliament after being introduced into the Senate on 5 February 2020.
The Bill implements a number of recommendations from the ASIC Enforcement Review Taskforce Report in order to:
- ‘harmonise and enhance ASIC’s search warrant powers’;
- ‘allow ASIC to receive telecommunications intercept material to investigate and prosecute serious offences’;
- ‘strengthen ASIC’s licensing powers’; and
- ‘extend ASIC’s banning powers’
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This article was written by Natalie Cambrell, Partner, Sanela Osmanovic, Associate and Joseph Cheung, Solicitor.