Welcome to the latest issue of the KHQ Super Alert. This week, APRA finalised CPS 230 and APRA and ASIC issued an information report outlining the results of their joint review into the implementation of the retirement income covenant.
APRA – Final SPG 530 Investment Governance released
On 20 July 2023 APRA released the final Superannuation Prudential Practice Guide SPG 530 Investment Governance (SPG 530). The now final SPG 530 was released for consultation on 17 November 2022 and accompanies Prudential Standard SPS 530 Investment Governance, which came into force on 1 January 2023 (see our Super Alerts from 18 November 2022 and 25 November 2022).
According to APRA, SPG 530 provides:
- ‘additional guidance to support requirements relating to liquidity management, stress testing and asset valuations’;
- ‘an outline of how APRA expects trustees will consider environmental, social and governance risk factors as part of their overall investment risk management’;
- ‘greater clarity in areas requested by industry in applying the standard’; and
- ‘a more streamlined approach to guidance, bringing SPG 530 in line with APRA’s [m]odernising the [p]rudential [a]rchitecture strategic initiative’.
Click here for details.
APRA and ASIC – Early consultation on FAR for ADIs
On 20 July 2023 APRA and ASIC commenced joint consultation on materials ‘to support the implementation of the Financial Accountability Regime (FAR) by the financial services industry’. While this consultation is applicable to ADIs only, the regulators have said that they ‘will consult on the list of specific key functions for insurance and superannuation entities in due course’ and they encourage these entities to ‘review the Regulator rules as their key functions are likely to be similar to the list included for ADIs’.
According to joint media releases issued by both regulators, the package of documents released for consultation includes:
- ‘proposed Regulator rules that prescribe information for inclusion in the FAR register of accountable persons, including supporting detail about the ADI key function descriptions’; and
- ‘proposed Transitional rules that prescribe information to be provided by banking entities in relation to their existing accountable persons under the BEAR at the transition point’.
Consultation will close on 17 August 2023.
Click here, here, and here for details.
APRA – Updates to SDT FAQs
On 19 July 2023 APRA made amendments to two frequently asked questions in relation to the superannuation data transformation project. The amended questions are:
- Superannuation Reporting Standard 332.0 Expenses ‘How should service providers or payees that are standard employer sponsors be treated in SRS 332.0 Table 1 ‘Payees and service providers’ when reporting the ‘Service provider relationship type’?’; and
- Superannuation Reporting Standard 605.0 RSE Structure ‘How is ‘connected entity’ defined for the purpose of reporting ‘Investment option management type’ and ‘Investment option strategy setting type’ in SRS 605.0 Table 3 ‘Investment options’?’.
Click here for details.
ATO – Updates to ATO online services simulator
On 19 July 2023, the ATO announced that its ‘ATO online services simulator’ was ‘updated on 1 July 2023’. According to the ATO, the simulator includes ‘8 different client super and tax scenarios’ and can help people ‘get a feel for the functions and features of ATO online for super and for myTax’ in order to assist ‘members understand how [the trustee’s] reporting interacts with [the ATO’s] actions and online displays’.
Click here for details.
APRA and ASIC – Trustees to improve retirement outcomes planning
On 18 July 2023, APRA and ASIC released a report setting out findings from a joint thematic review into the implementation of the retirement income covenant. The report titled Information report: Implementation of the retirement income covenant: Findings from the APRA and ASIC thematic review (Information Report) explains that the regulators considered how RSE licensees:
- ‘identify and understand members’ needs in retirement’;
- ‘assist members with information, financial advice and product offerings’; and
- ‘execute and oversee their retirement income strategy, and assess whether the intended outcomes are being achieved’.
Separate media releases issued by both regulators identify the key findings of the Information Report and indicate that RSE licensees should focus on ‘[u]nderstanding member needs’, ‘[d]esigning fit-for-purpose assistance’, and ‘[o]verseeing strategy implementation’.
The Information Report outlines six ‘priority actions for RSE licensees’ as well as further information on the findings of the review and examples of better practices that trustees are expected to consider and use to ‘address, with urgency, the gaps in their approach’.
APRA will consult on proposed amendments to enhance its prudential framework ‘to reflect the key findings of the review’ later in 2023.
In a speech given on the same day, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, commented that while the Government ‘celebrates the successes of superannuation’, ‘service standards in the superannuation system need to improve’ and ‘[f]unds have to do better’.
Click here, here, here, and here for details.
APRA – New operational risk management prudential standard
On 17 July 2023, APRA released the finalised prudential standard CPS 230 Operational Risk Management (CPS 230) and draft practice guide CPG 230 Operational Risk Management (CPG 230). The now finalised CPS 230 was released for consultation in July 2022 (see our Super Alert from 29 July 2022) and will commence from 1 July 2025.
According to APRA, CPS 230 ‘provides a foundation for APRA-regulated entities to’:
- ‘strengthen operational risk management through new requirements to address identified weaknesses in existing controls’;
- ‘improve business continuity planning to ensure they are positioned to respond to severe disruptions’; and
- ‘enhance third-party risk management by ensuring risks from material service providers are appropriately managed’.
Consultation on the draft guidance (CPG 230) will close on 13 October 2023.
Click here and here for details.
This alert was written by Kiara Leslie (Lawyer), Sanela Osmanovic (Senior Associate), Andrew Taylor (Special Counsel), and Natalie Cambrell (Director).
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