Welcome to the latest issue of the KHQ Super Alert. This week, ASIC announced a range of commitments made by trustees following its surveillance into investment switching, APRA invited submissions on Phase 2 of its Superannuation Data Transformation project and the ATO released a supplementary guide on tax controls for third party data.
ASIC – End to COVID financial advice relief
On 7 April 2022, ASIC issued a media release announcing that the temporary relief in the ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268 would end on 15 April 2022 and not be renewed. As referred to in our Super Alert of 25 September 2020, the instrument provides ‘temporary relief measures to facilitate retail clients receiving timely and affordable financial product advice because of the adverse economic effects of the coronavirus’ and has been extended several times. ASIC has advised that based on the current COVID-19 response in Australia, there is no longer ‘a sufficient basis for a decision by ASIC to further extend the relief provided by the COVID-19 Instrument’.
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ASIC – Outcome of ASIC surveillance of investment switching
On 6 April 2022, ASIC issued a media release announcing a range of measures which have been implemented by trustees to improve the management of conflicts following its surveillance into executives’ personal investment activity (as referred to in our Super Alert of 29 October 2021).
ASIC reports that it had ‘expected to find robust systems in place to prevent directors and senior executives from potentially misusing price sensitive information for personal gain’ but instead found ‘significant deficiencies in their conflicts management arrangements relating to investment switching’ including ‘lack of oversight and control measures’.
Trustees have now ‘committed to implement a range of changes to improve arrangements for managing conflicts’ in response, including by:
- ‘identifying switching as a potential conflict of interest;
- incorporating steps to prevent inappropriate trading (such as introducing blackout periods or trading windows); and
- expanding conflicts arrangements to cover trading by related parties of directors and senior executives.’
ASIC reports that it will ‘continue to work with APRA on ensuring trustees have appropriate policies and procedures in place to manage possible conflicts of interest’.
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Legislation – Regulations amended to allow commutation of certain income streams
On 4 April 2022, the Treasury Laws Amendment (Allowing Commutation of Certain Income Streams) Regulations 2022 were registered on the Federal Register of Legislation. The regulations provide for ‘the commutation of certain income streams for the purposes of meeting the superannuation transfer balance cap’. As referred to in our Super Alert of 21 January 2022, now that the regulations have been registered, trustees will be able to prepare for their transfer balance cap reporting of these commutations.
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APRA – Consultation on Superannuation Data Transformation Phase 2
On 4 April 2022, APRA released a discussion paper outlining the proposed scope and approach to Phase 2 of its Superannuation Data Transformation project.
According to APRA, the second phase of this multi-year project ‘will focus on lifting the granularity of the data APRA collects across all of the superannuation industry’s business operations’. It follows the completion in March 2021 of Phase 1 (Breadth), which ‘addressed urgent data gaps and extended the collections to include choice products and investment options’.
ARPA proposes to ‘conduct industry consultation across three periods from September 2022 to June 2023 on the following topics:
- September to November 2022: RSE licensee operations and profile and financial data;
- November to February 2022: Non-financial risk, insurance and investments;
- March to June 2023: Membership, retirement outcomes, defined benefits, disclosure and any other options raised through consultation.’
Submissions on APRA’s proposals are due 12 May 2022.
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APRA – Proposed amendments to the definition of a significant financial institution
On 4 April 2022, APRA published a letter to all APRA-regulated entities, announcing the commencement of its consultation on minor amendments to align and centralise the definition of a significant financial institution (SFI) within the prudential framework.
APRA’s letter reports that under the proposed approach, all prudential standards would use the same definition of an SFI. According to APRA, ‘[c]entralising the definition of an SFI would not result in any changes to the quantitative criteria (asset thresholds) that have been used to determine SFIs in existing prudential standards’, but ‘would lead to some small changes to the qualitative criteria’.
APRA has proposed to amend prudential standards which differentiate between requirements for SFIs and non-SFIs to reference this common definition, including Prudential Standards CPS 511 Remuneration.
APRA has invited feedback on the draft amendments and submissions are due 2 May 2022.
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Legislation – Extension of temporary reduction in minimum pension drawdown rates
On 1 April 2022, the Superannuation Legislation (Superannuation Drawdown) Regulations 2022 were registered on the Federal Register of Legislation. The regulations will implement the one superannuation-related measure announced in the Federal Budget last week (as referenced in our Super Alert of 1 April 2022) by extending the temporary reduction in minimum pension drawdown rates for another financial year until 30 June 2023.
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ATO – Supplementary guide on tax controls for third party data released
On 1 April 2022, the ATO published a media release to announce the publication of a supplementary guide to its Tax Risk Management Governance and Review Guide, titled Governance over third-party data. The supplementary guide was ‘developed in consultation with industry stakeholders’ and outlines the ATO’s ‘approach to tax controls for the collection and reporting of third-party data for large superannuation funds, managed investment funds and insurance companies’.
Click here for details.
Legislation – Instrument to correct unintended outcome of the Better Advice Act
On 1 April 2022, the ASIC Corporations (Existing Providers) Instrument 2022/241 was registered on the Federal Register of Legislation. The instrument implements ‘interim measures to address an unintended prohibition on AFS licensees authorising certain Existing Providers to provide personal advice to retail clients’. The unintended prohibition concerns those who have not yet passed the financial adviser exam or obtained the appropriate qualification.
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