ASIC and APRA have each given updates on their regulation of superannuation.
The Financial Services Royal Commission endorsed the current ‘twin peaks’ model of financial regulation. Responsibility for conduct and disclosure regulation lies primarily with ASIC and responsibility for prudential regulation with APRA.
In a recent speech ASIC Commissioner, Sean Hughes discussed the examples of the types of unacceptable conduct that were highlighted in the Royal Commission that relates to superannuation which include:
- poor governance and the management of conflicts of interest;
- failing to act in the best interests of members, including in fees charged, grandfathered commissions or in the delays to the transitioning of members to MySuper;
- issues around fees for no service; and
- poor practices to gain and retain members, including the use of inducements to encourage employers to select a fund as the default for their employees, as well as the use of fund monies for expenses that may not be appropriate.
He said ASIC will continue its our interest in superannuation is broad and covers topics such as insurance, complaints, advice, promotional activities, as well as disclosure and financial services licence conduct obligations .
ASIC will implement the Royal Commission’s recommendations that are directed to ASIC relevant to superannuation.
The recommendations include:
- that trustees have no other role;
- no deduction of advice fees from MySuper accounts and more limited ability to deduct advice fees from choice accounts;
- prohibition on hawking of superannuation products—there are already anti-hawking provisions that apply but the Government’s response contemplates a tightening of this;
- people only ever have one default account;
- improving the effectiveness of employer inducement prohibitions;
- the introduction of additional civil penalties – if the Member Outcomes Bill is passed it will make key trustee and director obligations a civil penalty provision;
- the adjustment to ASIC/APRA roles to give ASIC an expanded conduct role; and
- the extension of the EAR regime to superannuation entities.
Additionally, some of the advice and insurance recommendations coming out of the Royal Commission Report will also have a significant impact on superannuation. These include:
- ending grandfathering for commissions by 1 January 2021;
- making claims handling a financial service;
- making the insurance codes enforceable;
- undertaking a review of universal terms;
- APRA increasing its expectations in relation to insurance provider choice and status for insurance purposes.
APRA’s Deputy Chair Helen Rowell discussed APRA’s response to the Royal Commission and the Productivity Commission reports.
In addition to taking a more assertive supervisory stance, APRA will deliver greater transparency; on the industry’s operations, performance and delivery of outcomes, and also on the actions we are taking to lift behaviour and practices across the industry and within individual trustees. Although there are good reasons why we can’t and don’t disclose every supervisory action we take, the Royal Commission has made clear that it’s not enough for us to only act behind the scenes; the public needs to have greater confidence that action is being taken to hold trustees and directors to account and to address underperformance and poor outcomes. We will therefore start providing, to the extent feasible, more information on the steps we are taking to ensure trustees address weaknesses and rectify breaches, including instances of formal enforcement action…
we will be undertaking a major review of the superannuation data reporting regime. This review aims to provide greater coverage, enhanced consistency and better quality data through clarifying and revising definitions, and increased granularity in some areas, such as expenses.
She expressed regret that the Members Outcome Bill – which provides an expanded directions power and the ability to take civil penalty action for breaches of obligations to members – has not yet passed the Parliament.