Welcome to the latest issue of the KHQ Super Alert. This week, APRA released the second annual performance test results for MySuper products and released a response paper on Phase 2 of the Superannuation Data Transformation project. ASIC has encouraged fund trustees to review their TMDs, Treasury has released a significant proposals paper in relation to financial advice, and the Attorney-General’s department is seeking feedback on the Modern Slavery Act 2018 (Cth).
APRA – Annual performance test results released
On 31 August 2022, APRA released the performance test results of its second annual performance test for MySuper products. According to APRA, 69 MySuper product were assessed and ‘[f]ive products failed to meet the benchmark this year’. Four of those products have ‘failed the test for a second time are now closed to new members’.
Click here for details.
NSW Supreme Court – Disability benefit decision
On 30 August 2022, the New South Wales Supreme Court handed down its decision in Tambakeras v UniSuper Limited [2022] NSWSC 1162. The case related to a member’s claim for disability benefits, which had been declined by the trustee on the basis that the member did not satisfy the disablement definition because he ceased work due to redundancy, not due to disability. The Supreme Court ultimately agreed with the trustee, and ordered the member to pay the trustee’s costs of the proceeding.
Click here for details.
Treasury – Proposals paper released proposing reforms for financial advice
On 29 August 2022, Treasury released a proposals paper for public consultation which outlines significant proposed reforms to financial advice for retail clients. The purpose of these reforms is to ‘simplify the regulatory framework to better enable the provision of high quality, accessible and affordable financial advice for retail clients’. As referred to in our Super Alert of 18 March 2022, this proposals paper is related to Treasury’s quality of advice review.
The key reforms are for the financial services law to (amongst other things):
- ‘regulate the provision of ‘personal advice’ only, and not general advice;
- require a ‘person who provides personal advice…to provide ‘good advice’ instead of the best interests duty which would be removed;
- allow trustees ‘to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement’ and give trustees ‘discretion to decide how to charge members for personal advice they provide to members’;
- replace the ‘requirement for advisers to provide a statement of advice or record of advice’ with a requirement ‘to maintain complete records of the advice they provide and to provide a written record of advice to a client on request’.
The consultation period will close on 23 September 2022.
Click here for details.
Treasury – Exposure legislation for virtual hearings and examinations by regulators
On 29 August 2022, Treasury released an exposure draft Bill and regulations which seek to ‘clarify that relevant Treasury portfolio regulators [including APRA and ASIC] can hold hearings and examinations virtually’. The amendments are to ensure hearings and examinations are ‘held quickly and efficiently for the benefit of all parties’.
The consultation period closes on 23 September 2022.
Click here for details.
ASIC – Superannuation trustees encouraged to review and improve target market determinations
On 29 August 2022, ASIC issued a media release in relation to target market determinations (TMD). Trustees are being encouraged to review and (if necessary) ‘improve the effectiveness of their TMDs’. ASIC reviewed a sample of 55 TMDs prepared by 27 trustees. ASIC provided a list of observations relating to:
- defining target markets;
- describing investment sub-markets;
- setting review triggers and review periods; and
- distributor complaint reporting.
ASIC expects trustees to consider these observations when reviewing their TMDs and trustees are ‘strongly encouraged to focus on clarity and specificity to ensure these documents are fit-for-purpose’.
ASIC Commissioner Danielle Press is quoted as saying that ‘[t]rustees must not adopt a ‘set and forget’ approach to their target market determinations. Failure to review them regularly and take corrective action can result in harm if the product is inconsistent with the objectives, financial situation and needs of consumers in the target market. ASIC is now focussing on compliance with the design and distribution obligations, and we will move to enforce the obligations where necessary’.
Click here for details.
ASIC – Federal Court penalises licensee for superannuation advice breaches
On 29 August 2022, ASIC issued a media release in relation to the Federal Court’s decision in Australian Securities and Investments Commission v MobiSuper Pty Limited [2022] FCA 990. This case, which is unrelated to the Federal Court decision in Australian Securities and Investments Commission v MobiSuper Pty Ltd [2021] FCA 855, concerned superannuation advice breaches; and the Federal Court ordered that combined penalties of $250,000 be paid by the parties for failures surrounding promotion of the relevant fund.
The Court found that, in marketing telephone calls, the customer service officers:
- ‘provided personal advice without acting in the best interests of consumers’; and
- ‘failed to warn consumers that the advice provided was based on incomplete or inaccurate information’.
The Court also found that the licensee:
- ‘made misleading claims that consumers could save fees by opening an account with the Fund and consolidating or rolling over their superannuation into the account’; and
- ‘failed to provide any Statements of Advice to consumers as required by law’.
It was also found that the licensee did not comply with its obligation to ensure that the financial services were provided efficiently, honestly and fairly.
Click here for details.
APRA – Released paper on Phase 2 of the SDT project
On 29 August 2022, APRA released a response paper outlining the key feedback received, emphasising the timelines, and addressing the scope for Phase 2 of the Superannuation Data Transformation (SDT) project.
APRA’s SDT project aims to ‘improve member outcomes’ and ‘drive better industry practices’ by ‘significantly enhancing the comparability and consistency of reported data’, making it easier to reliably compare and scrutinise fund and product performance. Phase 2 “Depth” is set to ‘explore new and better approaches to data reporting across all areas of [superannuation fund operations]’.
Click here for details.
ASIC – Endorsement of FRAA report
On 25 August 2022, ASIC issued a media release in relation to the Financial Regulator Assessment Authority’s (FRAA) report ‘Effectiveness and Capability Review of the Australian Securities and Investments Commission’.
The FRAA report ‘made four recommendations around enhancing ASIC’s use of data and technology, strengthening its engagement with stakeholders, enhancing its ability to measure effectiveness and capability, and continuing to broaden its mix of skill sets’ (Recommendations).
According to the FRAA’s report, ‘ASIC has several initiatives underway that align’ with the Recommendations, including:
- ‘[i]mplementing multi-year data and digital strategies that focus on uplifting ASIC’s technology systems and data capabilities’;
- ‘[i]mplementing a multi-year people strategy to help deliver ASIC’s organisational priorities’;
- ‘[i]mplementing regulatory efficiency initiatives to make changes to the way ASIC administers the law and to make it easier for stakeholders to interact with ASIC’; and
- ‘[t]aking steps to enhance how ASIC measures and reports on its effectiveness and capability.’
Click here for details.
Attorney-General’s Department – Review of Australia’s Modern Slavery Act
On 22 August 2022, the Attorney-General’s Department announced that it is undertaking a statutory review of the Modern Slavery Act 2018 (Cth) (Act) and is consulting with businesses and other interested stakeholders (particularly entities reporting under the Act) to assess the Act’s operation and compliance over the first three years since it commenced.
The consultation period closes on 22 November 2022.
Click here for details.
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