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Superannuation is the future financial security for Australians and trustee misconduct significantly impacts members’ retirement savings. In response to the Hayne Royal Commission, the Government has introduced a number of legislative reforms in to support the sector, with most of the reforms commencing from 1 January 2021.
The reforms primarily expand ASIC’s role as the conduct regulator and increase ASIC’s powers to enforce provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act), as well as broadening the scope of the conduct obligations owed by trustees, covered by existing powers under the Corporations Act 2001 (Corporations Act) and the Australian Securities and Investments Commissions Act 2001 ( ASIC Act). While APRA still retains its enforcement action provisions , the reforms provide for an increased monitoring role by ASIC with the aim of increasing consumer protections and ensuring market integrity.
The reforms have significant implications for trustees, and they are explained below:
An entity provides a superannuation trustee service if they operate a registrable superannuation entity (RSE) as trustee. The creations of this new financial service will fill gaps in ASIC’s existing jurisdiction and ensure that conduct obligations in the Corporations Act – including the need to act efficiently, honestly and fairly – apply to trustee activities relating to operating a superannuation fund.
From 1 July 2021, all trustees will be required to hold an AFS licence with authorisations to deal in superannuation and to provide a superannuation service.
Public offer superannuation trustees who are existing AFS licence holders with an authorisation to deal in superannuation are deemed, by law, to have the new authorisation – to provide a superannuation trustee service – from 1 January 2021.
Non-public offer fund trustees will no longer be exempt from holding an AFS licence to deal in financial products, and will need to apply for an AFS licence to deal in superannuation and provide a superannuation trustee service.
The modified SIS Act gives ASIC greater powers to take enforcement action against unlawful and harmful conduct by superannuation trustees. This includes greater scope for taking action against trustees who may be in breach of the covenants in section 52 of the SIS Act.
Enforcement is an important component to ensure that trustees are held accountable for misconduct.
Under the SIS Act, trustees must report significant breaches of their RSE licence conditions to APRA, no later than ten business days after becoming aware of a significant breach (that has occurred or is imminent). Effective from 1 October 2021, the reforms increase this timeframe to 30 calendar days, which is consistent with the amended timeframes in the Corporations Act that will come into effect from the same date.
The aim of the reforms is to protect the financial wellbeing of the Australian community and provide for a stable, and stronger financial future for retiring Australians. The increased powers provided to ASIC and their collaboration with APRA aims to maintain the integrity of the system, with the increased regulatory obligations and enforcement action powers, ensuring trustees are held to a higher fiduciary standard and are prosecuted for breaches.