By Mark Bland, Partner and Geoffrey McCarthy, Special Counsel

This fortnightly update is designed to help superannuation trustees track and manage regulatory change. We look ahead to forthcoming developments, look back at recent changes and then consider the impact on trustees. This edition’s spotlight is on ASIC’s Interim Corporate Plan. Enforcement remains a key focus, particularly misconduct in superannuation and insurance.

Key developments

• 24 June – APRA publishes new monthly and quarterly reporting requirements for trustees relating to COVID-19 early access to superannuation and other data affected by the pandemic.
• 30 June – first Modern Slavery reporting period comes to an end for most funds (with reporting due 31 March 2021 on actions taken during this period.)
• 1 July – Members can apply for 2nd tranche of COVID-19 hardship access to $10,000 of super.
• 1 July – Superannuation trustees must fully comply with prudential standard ‘CPS 234 Information Security’ (including third party information assets unless where an extension given by APRA)
• 31 July – ASIC expected to publish RG 271 Internal Dispute Resolution.

Looking ahead

30 June – first Modern Slavery reporting period comes to an end for most funds (with reporting due 31 March 2021 on actions taken during this period.)

30 June – Transitional rules for internal dispute resolution, including ASIC’s approval of the definition of ‘complaint’ were to cease but will be extended to 4 October 2021. ASIC Corporations and Credit (Internal Dispute Resolution—Transitional) Instrument

30 June – Last day for eligible temporary residents, and eligible Australian and New Zealand citizens and permanent residents to apply to access first tranche of up to $10,000 of their super.

1 July – The value of a Commonwealth Penalty unit increases to $222 Notice of Indexation of the Penalty Unit Amount

1 July – Members can apply for 2nd tranche of COVID-19 hardship access to $10,000 of super.

1 July – Superannuation trustees must comply with prudential standard ‘CPS 234 Information Security’ Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 1 of 2018. APRA will consider requests for a six-month extension by regulated entities on a case-by-case basis.

Looking Back

25 June  – FASEA announced that it had decided to grant a one off 3 months extension for financial advisors to complete there 40 hours annual CPD requirements Three month CPD relief for advisers in recognition of COVID-19 business disruption

24 June – APRA wrote to trustees in relation to its COVID-19 Pandemic Data Collection request  new reporting requirements for trustees relating to COVID-19 early access to superannuation and other data affected by the pandemic. COVID-19 Pandemic Data Collection request and Reporting requirements for superannuation trustees

23 June – The Treasury Laws Amendment (2020 Measures No.3) Act 2020 commences which includes extension of deadlines for FASEA Educational Requirements for financial advisors. The exam must now be completed by 1 January 2022 and the degree requirements by 1 January 2026. Treasury Laws Amendment (2020 Measures No.3) Act 2020

23 June – Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 with provisions for all directors to be required to have a Director Identification Number (DIN) enacted Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020

20 June – Changes to supervisory levies including for trustees increasing maximum levies and changing indexation methods commence Superannuation Supervisory Levy Imposition Amendment Act 2020 Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Act 2020

18 June – A Bill to allow law firms to obtain group cost orders (charge contingency fees) for class actions passed both houses of Victorian Parliament (Justice Legislation Miscellaneous Amendments Bill 2019). See MO commentary

18 June – FASEA announced exam sitting dates for 2020 and numbers of persons who have sat or registered for the exam FASEA confirms remaining Exam sitting dates for 2020 and adviser participation rates

17 June – ASIC published RG 272 Product Intervention Powers ASIC RG 272 Intervention Power

12 June –  ASIC published INFO 245 to help boards with the governance of executive variable pay decisions during the COVID-19 pandemic. INFO 245

12 June – ASIC publishes consultation draft Cost recovery implementation statement showing indicative levies regulatory costs to be recovered for 2019-20 ASIC consultation Cost recovery implementation statement – 2019-20

On the horizon spotlight – ASIC Interim Corporate Plan 2020-2021

ASIC published on 11 June 2020 an Interim Corporate Plan for 2020-2021 resulting from ASIC’s modified strategic planning process for the 2020-21 year, in response to the impact of COVID-19 on the financial system. ASIC’s immediate focus has been on assessing the key vulnerabilities in ASIC regulated sectors in the current environment and developing targeted strategic priorities.  Enforcement remains a key focus, including in particular misconduct that relates to superannuation and insurance.

ASIC also published for feedback a draft cost recovery implementation statement (“CRIS”) for 2019-2020. This publication contains indicative levies but does not reflect the adjusted work program to respond to the impact of COVID-19.

ASIC notes that it has given facilitating access to effective advice when individuals are considering seeking early access to their superannuation as an example of a new activity coming from new activities.  ASIC will conduct surveillance of financial advice to ensure that its temporary relief and no action measures to improve access to timely and affordable financial advice for consumers is not abused.

As part of its objective if protecting consumers from harm at a time of heightened vulnerability, ASIC will be taking action to ensure that entities give accurate information to consumers, particularly on accessing early release of superannuation. ASIC will monitor proactively and reactively, through a new ASIC-wide working group, the increased risk of consumers being exploited through misleading or fear-based advertising.

ASIC will conduct a thematic surveillance of superannuation trustee communications to members about the impact of the COVID-19 pandemic and resultant legislative measures on superannuation funds and member benefits. ASIC will take appropriate regulatory action, including enforcement action and publish communications about the findings of its surveillance.

ASIC also published an update on the timing of key outputs over the coming months, reflecting changes from our adjusted work program announced on 14 April 2020 including information on proposed timing of consultation and release of regulatory guidance in relation to legislation implementing the recommendations of the Financial Services Royal Commission.

ASIC will be working with super trustees, advisors and other stakeholders to minimise member harms and inappropriate advice. ASIC will be consulting with and providing guidance to industry on its expectations of fair and transparent behaviour (e.g. in relation to internal dispute resolutions) on a revised timeline as necessitated by the COVID-19 pandemic.  Specifically ASIC announced that it plans to publish a new regulatory guide, RG 271 Internal dispute resolution in July 2020 with a view to commencement of changes on 5 October 2021.

An area of particular ASIC focus remains insurance in superannuation. ASIC will monitor the impact of the COVID-19 pandemic on the insurance offerings of superannuation trustees. ASIC will review a sample of policy documents for insurance in super to ensure they are fair and balanced, and monitor policy renegotiations along with reviewing trustee public communications about insurance. ASIC will engage with the Australian Financial Complaints Authority (AFCA) to monitor poor claims and complaints handling processes.  Where ASIC identifies issues, it will engage with APRA and trustees and take appropriate regulatory action.

The CRIS indicates ASIC expected to spend $10,451,000 on surveillance and enforcement in 2019-2020.  The indicative levy is $18,000 plus $13.37 per $1m of assets over $250m. Additional levies and fees may apply to trustees who make applications to ASIC or are authorised under their Australian Financial Services licence in other ways. For example, a trustee who is authorised to provide personal advice to retail clients on superannuation products will also be subject to a levy of $1,500 plus $1,571 per advisor.

Impact on Trustees

Trustees are having to move fast in response to COVID-19 but they must hold to their governance frameworks as they are squarely in ASIC’s radar.

Trustees will need to include among their compliance focus the areas identified by ASIC such clear and balanced communications especially in relation to insurance and when giving advice. ASIC may for example about communications emphasising the value of insurance without due recognition of the impact on the cost on likely retirement outcomes.  Information about the potential benefits of making additional superannuation contributions or using early access entitlements needs to be balanced with a recognition that their members also need to consider alternatives such as debt repayment.

Although the indicative amounts of levy in the CRIS are only indicative and will be affected by ASIC’s revised focus in the light of COVID-19, the significant amounts to be applied for surveillance and enforcement for superannuation is likely to be a good guide to ASIC’s continuing focus in its activities.