Welcome to the latest issue of the KHQ Super Alert. This week the Government made previously-announced changes to the annual performance test and APRA finalised CPS 511 Remuneration, while ASIC provided an update on its recent enforcement and regulatory activities.
Legislation – Annual performance test changes made
On 3 August 2023, the Superannuation Industry (Supervision) Amendment (Your Future, Your Super—Addressing Underperformance in Superannuation) Regulations 2023 were registered on the Federal Register of Legislation. The regulations make various changes to update the annual superannuation performance test, including amending the SIS Regulations to:
- ‘amend the testing period, benchmarks and notification letter that form part of the annual performance test requirements’;
- ‘amend the operation of the test for trustee-direct [sic] products, so that platform products are tested separately to non-platform products, and on a gross-of-taxation basis’; and
- ‘make minor and technical amendments to the Your Super comparison tool to ensure that the tool reflects updated reporting standards’.
The regulations also include an amendment to ‘the Electronic Transactions Regulations 2020 to allow APRA to give notifications in relation to the performance test to trustees by means of electronic communication’.
See our Super Alert from 6 April 2023 in relation to the Treasury consultation for the draft regulations.
Click here for details.
APRA – New FAQs on the Your Future, Your Super package
On 3 August 2023, APRA published two new frequently asked questions (FAQs) in relation to the administration of the Your Future, Your Super performance test. The two new questions are:
- trustee-directed product FAQ 9 (‘How do trustees determine if their investment option is a TDP for the performance test?’); and
- technical FAQ 13 (‘How are standard fee and cost arrangements reported at each level of product, menu and option?’).
Click here for details.
ASIC – Enforcement and regulatory update
On 2 August 2023, ASIC released Report 767 ASIC enforcement and regulatory update: April to June 2023 (Report 767). Report 767 provides a summary of ASIC’s enforcement actions from April to June, including ASIC’s enforcement of product design and distribution obligations, its efforts in deterring greenwashing, and calling for improvements in superannuation trustee practices. Report 767 re-iterates ASIC’s enforcement priorities, including misconduct in the superannuation sector, and misleading conduct in relation to sustainable finance, including greenwashing.
Other superannuation-specific references in the report about ASIC’s activities during the year include the following ASIC statements:
- ‘We issued our first interim stop orders against superannuation and insurance products, due to deficiencies in their target market determinations (TMDs) under the design and distribution obligations.’
- ‘We also released the findings of three ASIC reviews of superannuation trustee practices, and called on superannuation trustees to improve their practices in a number of areas.’
- ‘In June, we called on superannuation trustees to ensure they are meeting their legal obligations for dealing with incoming money from consumers if a new or increased interest in a superannuation product cannot be issued by the next business day.’
- ‘Separately, we warned superannuation trustees to effectively consolidate duplicate member accounts after a review identified poor trustee practices resulting in consumer harm.’
- ‘To help trustees to better comply with their obligations, in April we released an information sheet that consolidates superannuation trustee transparency and disclosure obligations into one webpage with links.’
Click here for details.
APRA – CPS 511 (Remuneration) finalised
On 1 August 2023, APRA announced that it has released the final version of Prudential Standard CPS 511 Remuneration which requires APRA-regulated entities including superannuation entities to publicly disclose information on aspects of their remuneration. CPS 511 has been finalised following the completion of industry consultation which commenced last year. According to APRA, the latest updates to CPS 511 will mean that ‘[l]arger and more complex entities must disclose additional quantitative information, including on payments to top executives and how they have placed a material weight on non-financial measures such as risk management’.
These disclosure obligations ‘will now commence for all entities from their first full financial year following 1 January 2024’ however APRA will ‘provide additional flexibility around the timing of disclosures with annual disclosures required within six months of an entity’s financial year-end’. The media release also notes that APRA ‘will shortly publish the findings from an implementation review of CPS 511 to assist industry with implementing the new requirements’.
Click here for details.
APRA – Review of data collections roadmap
On 31 July 2023, APRA issued a letter to all APRA-regulated entities advising that it ‘will shortly commence the first annual review of its data collections roadmap’. The letter also ‘provides additional clarity on APRA’s near-term data priorities to help entities prepare for ongoing engagement and consultation’.
Of relevance to superannuation entities, APRA informs that it:
- ‘intends to commence formal consultation in November this year on proposed reporting standards for investments (including indirect investment costs), registrable superannuation entity (RSE) and RSE licensee profile, and RSE licensee financials’;
- ‘intends to postpone consultation on RSE licensee operations, other reporting standards relating to financial data and cross industry proposals for non-financial risk data collection, which were originally intended to commence in November’; and
- ‘will engage industry on timeframes for consultation on remaining topics, with the intent to confirm timeframes in early 2024’.
Click here for details.
This alert was written by Kiara Leslie (Lawyer), Sanela Osmanovic (Senior Associate), and Natalie Cambrell (Director).
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