Welcome to the latest issue of the KHQ Super Alert. This week, ASIC urged trustees to improve their insurance outcomes for members, while the Full Court of the Federal Court overturned an earlier decision relating to the consequences arising from historic fraudulent misrepresentations made by members in insurance applications.
KHQ article – Treasury begins review of managed investment schemes regulation – funds fast forward!
On 23 March 2023, we issued an article outlining the scope of the upcoming review by Treasury into the regulatory framework for managed investment schemes. As referred to in our Super Alert of 17 March 2023, this review was announced by the Government on 8 March 2023 as a means to ‘examine whether the regulatory framework is fit-for-purpose, identify potential gaps, and consider what enhancements can be made to reduce undue financial risk for investors’.
Click here for details.
ASIC – Trustees urged to ‘improve insurance outcomes for members’
On 22 March 2023, ASIC issued a media release announcing that it has released Report 760 Insurance in superannuation: Industry progress on delivering better outcomes for members (Report 760). Throughout 2022, ASIC conducted a review of the life insurance arrangements of 15 superannuation trustees and whether they had ‘made progress in addressing the issues raised by ASIC in various public communications since 2019 and were meeting new regulatory obligations’.
Report 760 acknowledges that trustees have made improvements but notes that they have ‘not made sufficient effort in all areas’ and outlines ‘key actions for all trustees when making improvements to their insurance arrangements’.
On a positive note, the review found that:
- ‘many trustees have made changes to the design of their insurance arrangements to better meet member needs and provide value for money’;
- ‘many trustee have worked with their insurers to streamline their claims processes to make them easier for members to navigate’; and
- ‘some trustees have improved the way they explain their insurance offerings to make it easier for members to understand’.
ASIC Commissioner Danielle Press commented that ASIC ‘expect[s] all trustee boards to engage with the report, learn from it, and take action to make improvements to ensure strong member outcomes’, continuing that ‘ASIC will use its regulatory powers where trustees are not complying with their obligations’.
Click here for details.
ASIC – Consultation in relation to managed investment scheme class orders
On 21 March 2023, ASIC issued a media release advising that it was ‘seeking feedback from responsible entities of managed investment schemes’ in relation to remaking certain class orders which are due to sunset on 1 October 2023. The two class orders for which ASIC is seeking industry feedback are:
- Class Order [CO 13/519] Changing the responsible entity; and
- Class Order [CO 13/656] Equality of treatment impacting on the acquisition of interests.
Submissions close on 11 April 2023.
Click here for details.
Government – Media release on FAR and CSLR Bills
On 20 March 2023, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, issued a media release commenting on the re-introduction to Parliament of the ‘legislation to establish the Financial Accountability Regime (FAR) and the Compensation Scheme of Last Resort (CSLR)’ (see our Super Alert of 10 March 2023). The media release highlights that there are currently ‘around 2,000 cases on hold with [AFCA], awaiting passage of the CSLR’ and that there are another 30 cases where ‘compensation has been awarded, but can’t be paid until the Scheme has been established’.
Click here for details.
Federal Court – Appeal in Sharma case allowed
On 17 March 2023, the Full Court of the Federal Court handed down its decision in AIA Australia Ltd v Sharma [2023] FCAFC 42. The Court allowed the appeal and set aside the orders of the primary judge in Sharma v HEST Australia Ltd [2022] FCA 536. The effect of this judgement is that where an incoming insurer takes over as the insurer for a superannuation fund from an outgoing insurer, the incoming insurer can rely on any remedies in the Insurance Contracts Act 1984 (Cth) or the general law where a member previously made a misrepresentation or non-disclosure to the outgoing insurer.
In considering whether the fraudulent misrepresentations which had been made to the outgoing insurer continued to be misrepresentations to the incoming insurer, the Court considered existing case law and found that the false misrepresentations did not need to be made directly to the incoming insurer; it was enough that they were made to the outgoing insurer with the intent to deceive the insurer for the purpose of obtaining insurance cover. The Court made this finding on the basis that it was unlikely that the member cared which insurer relied on the false answers. The Court also found that ‘there is a general rule that a representation, once made in the course of a negotiation for a contact, prima facie continues in force until it is withdrawn or altered or the contract is completed’ (citing the decision in Macquarie Generation v Peabody Resources [2000] NSWCA 361).
Click here for details.
This alert was written by Kiara Leslie (Lawyer), Sanela Osmanovic (Senior Associate), and Natalie Cambrell (Director).
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