Super Alert – 30 June 2023: SFT Crimes Act; Chapter 2M reporting; Interim Report C; climate related disclosure matters

Welcome to the latest issue of the KHQ Super Alert, the last for the 2022/23 financial year. It was a busy week this week with a further SFT Crimes Act decision being handed down and the Bill extending the Corporations Act Chapter 2M reporting and auditing requirements to RSEs receiving Royal Assent. The Government also commenced a second consultation on climate-related disclosure matters.

Case law update – Crimes Act SFT application, trust deed amendment

On 28 June 2023, the following decisions were handed down by various Supreme Courts:

  • Host-Plus Pty Limited v Maritime Super Pty Limited [2023] NSWSC 725 – which was a consent application for the giving of indemnities as part of an SFT. The Supreme Court however determined that an SFT ‘does not engage s 249E of the Crimes Act because it does not involve the “appointment” of a trustee’; and
  • Togethr Trustees Pty Ltd v Safai [2023] SASC 90 – which was an application to vary a trust deed ‘to insert a new rule to provide for a fee to establish a trustee risk reserve of funds to address the risk of the [t]rustee incurring liabilities in relation to which it will not be indemnified from the assets of the [f]und’. The application was approved.

On 22 June 2023, the New South Wales Supreme Court of Appeal also handed down its decision in Resolution Life Australasia Ltd v N M Superannuation Pty Ltd [2023] NSWCA 138, which related to the construction of a group life policy agreed between a life insurer and superannuation trustee.

Click here, here and here for details.

APRA – Farewell to Deputy Chair Helen Rowell

On 29 June 2023, APRA issued a media release paying tribute to Deputy Chair Helen Rowell who ‘oversaw the creation and implementation of APRA’s prudential framework for [the superannuation industry]’ and has ‘championed APRA’s cross-industry work on governance and risk management’.

Click here for details.

ASIC – Trustees to effectively consolidate duplicate member accounts

On 29 June 2023, ASIC issued a media release ‘warning superannuation trustees to effectively consolidate duplicate member accounts’. ASIC reviewed nine trustees to assess how they ‘are meeting their obligation to annually identify and automatically consolidate duplicate member accounts within a superannuation fund to minimise payment of unnecessary fees’.

According to ASIC, some key findings about actions trustees should take include:

  • ensuring there is a ‘[d]ocumented procedure for identifying duplicate accounts’ (six of the nine trustees had business rules and policies in place and at least annually ‘conducted the identification and matching process’);
  • communicate with members about duplicate accounts (six of the nine trustees contacted members ‘even though they are not specifically required to do so’); and
  • ensuring the trustee maintains ‘[o]versight of the process’, ASIC considers that trustees should have their own policy or process about account consolidation and shouldn’t rely on administrators.

Click here for details.

Legislation – ASIC Instrument registered clarifying the operation of ongoing financial adviser fee arrangements

On 28 June 2023, the ASIC Corporations and Superannuation (Amendment) Instrument 2023/512 (Instrument) was registered on the Federal Register of Legislation. This Instrument ‘modifies the operation of Instrument 2021/124 and Instrument 2021/126 to clarify circumstances when a new written consent is not required’. According to the Explanatory Statement for the Instrument:

  • ASIC Corporations (Consent to Deductions—Ongoing Fee Arrangements) Instrument 2021/124 ‘determines requirements for the written consent that fee recipients must receive from account holders (i.e. their clients) before deducting, arranging to deduct, or accepting the payment of, fees under an ongoing fee arrangement from the account holder’s account’; and
  • ASIC Superannuation (Consent to Pass on Costs of Providing Advice) Instrument 2021/126 ‘determines requirements for the written consent that superannuation trustees must have before passing the cost of providing financial product advice in relation to a member on to the member’s superannuation account under a non-ongoing fee arrangement’.

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ASIC – Estimated industry subsector levies for 2022-23

On 28 June 2023, ASIC issued a media release advising that it had released its ‘Cost Recovery Implementation Statement’ (Statement) for the 2022-23 financial year. The Statement details ASIC’s estimated costs and levies for each industry subsector in 2022-23 ‘to help entities plan and budget for the levies and fees to be charged’. ASIC has indicated that the ‘[f]inal levies will be published in December 2023 and invoiced between January and March 2024’.

The media release also identified that ‘ASIC and Treasury will establish a five-yearly consultation process with industry to examine the policy settings of the [industry funding model]’, which will address recommendations outlined in the final report of the Government’s Review of the ASIC Industry Funding Model (see the item later in this Super Alert).

Click here for details.

AUSTRAC – Consultation on AML/CTF legislative reforms has closed

On 27 June 2023, AUSTRAC issued a media release providing an update on the proposed AML/CTF legislative reforms. According to the media release, the ‘first round of public consultation’ has closed and ‘[a]ll feedback is currently being reviewed by the Attorney-General’s Department’. The update also explained that ‘[f]urther consultation will occur throughout the year’.

Click here for details.

Treasury – Second round of consultations on climate-related financial disclosures

On 27 June 2023, Treasury released a consultation paper for the second round consultation in relation to ‘proposed positions for the detailed implementation and sequencing of standardised, internationally‑aligned requirements for disclosing climate‑related financial risks and opportunities in Australia’. See our Super Alert from 16 December 2022 for more details on the first round of the consultation process.

In a joint media release issued on the same day, the Treasurer, the Assistant Treasurer and the Minister for Climate Change and Energy outlined that the proposed implementation approach includes ‘[m]andatory reporting requirements commencing from 1 July 2024 for Australia’s largest listed and unlisted companies and financial institutions’ and ‘[a] three-year transitional period’.

Click here and here for details.

Treasury – Review of ASIC Industry Funding Model final report

On 26 June 2023, Treasury released the final report relating to the Review of the ASIC Industry Funding Model (Review) and advised that the Government has agreed to the ten recommendations made in the Review, four of which are for ASIC to adopt. One of the ASIC- directed recommendations is for ‘ASIC to enhance its reporting, transparency, and consultation arrangements’ for its industry funding model.

Having considered the temporary levy relief that was previously in place for personal financial advice licensees, the Review recommended that further consultation be undertaken ‘to ensure that sub‑sector definitions, metrics and formulas [used to calculated levies] remain fit‑for‑purpose’.

In a media release issued on the same day, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, indicated that this would be progressed ‘alongside implementation of the Government’s Delivering Better Financial Outcomes package which includes [the Government’s] response to the Quality of Advice review’. Industry was also informed that the ‘temporary levy relief for personal financial advice licensees that was in place for 2020‑21 and 2021‑22’ will not be extended further.

Click here and here for details.

ASIC – Trustees called on to appropriately deal with member money

On 26 June 2023, ASIC issued a media release ‘calling on superannuation trustees to ensure they are meeting their legal obligations for dealing with incoming money from consumers’ when it is first received. ASIC reviewed the processes of twelve trustees ‘to understand how they met requirements for dealing with money received for a financial product set out in the Corporations Act’. According to ASIC, ‘all but one trustee failed to ensure their practices or disclosure aligned with their obligations’ but ‘no significant individual member impact was identified in [ASIC’s] review’.

The four main issues identified by ASIC in the review were that:

  • some trustees used ‘a non-compliant account to hold money’ (ie, it was not a ‘designated trust account’);
  • several trustees did not hold a member’s money for the required time (ie, it must be held until ‘an interest in a product was issued or increased’). ASIC encouraged trustees to review their ‘incoming cashflow management practices to ensure they comply’;
  • some trustees failed to ‘identify money subject to the requirements of section 1017E’ of the Corporations Act; and
  • ‘most of the disclosure material reviewed’ by ASIC ‘required improvement’.

Click here for details.

Legislation – Bill extending Chapter 2M reporting and auditing requirements given Royal Assent

On 23 June 2023, the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 received Royal Assent after having passed both Houses of Parliament on 21 June 2023. The now 2023 Act extends the ‘financial reporting and auditing requirements in Chapter 2M of the Corporations Act to apply to [RSEs]’ with effect from 1 July 2023. See our Super Alert from 25 November 2022 for further details

Click here for details.

APRA – Results of biennial survey

On 23 June 2023, APRA released the results of the biennial stakeholder survey of APRA-regulated entities. The survey is used to help assess APRA’s ‘performance and effectiveness’. The 2023 survey was designed to be shorter for entities to complete and used a new set of questions and a new answer scale (‘positive/neutral/negative scale’). Of the 282 entities surveyed, 98% agreed with the statement that ‘APRA’s supervision of the financial services sector benefits your industry in general’.

Click here for details.

ALRC – Interim Report C tabled in Parliament

On 22 June 2023, the Australian Law Reform Commission (ALRC) released its report titled Financial Services Legislation: Interim Report C (Interim Report C) which was tabled in Parliament. See our Super Alert from 7 October 2022 for details on Interim Reports A and B. Interim Report C includes four recommendations in relation to Corporations Act penalty provisions and fifteen proposals in relation to various other topics, including consumer protection in financial services, disclosure and general regulatory obligations.

One of the more significant proposals included in Interim Report C includes restructuring and reframing ‘the provisions relating to the regulation of financial products and financial services’ as a new ‘Financial Services Law’; the intent would be for this to be enacted as Schedule 1 to the Corporations Act and ‘make the law clearer, and more coherent and effective’.

Consultation on the proposals will close on 26 July 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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KHQ Lawyers - Sanela Osmanovic

Sanela Osmanovic Senior Associate

Sanela is a Senior Associate in our Superannuation & Financial Services team, and has a broad range of experience working with a range of superannuation fund trustees... Read More

KHQ Lawyers - Andrew Taylor

Andrew Taylor Special Counsel

Andrew is a Special Counsel in the Superannuation & Financial Service team.

Andrew’s practice is focused on financial services and products, particularly superannuation, investment platforms... Read More

KHQ Lawyers - Natalie Cambrell

Natalie Cambrell Director

Natalie leads our Superannuation & Financial Services team. With more than 25 years’ experience, she has an enviable reputation for her in-depth knowledge in these highly regulated and complex... Read More