Good afternoon and welcome to the BRR Legal Brief, looking at the major legal issues affecting corporate Australia. I’m David Bushby and today we’re talking superannuation reform, and in particular we’re looking at ASIC’s latest announcement which came through late last week on the Stronger Super Reform package. Here to discuss the announcement and what it means for the super industry is John Edstein from the Superannuation team at King & Wood Mallesons. Welcome John.
John just to kick us off, we’ve seen the announcement come through late last week, it was a fairly lengthy announcement, but just to recap, where are we at on superannuation reform, and how does this announcement build on that?
Yes thanks David. We’re actually in the crunch – for what’s called the Strong Super Reforms, in terms of most of them will bite in terms of application going forward from 1 July next year. In terms of legislation we’ve got precious little that’s actually been signed off if you like into law, but a lot of either draft law or bills or draft prudential standards kicking around. In terms of the ASIC website release last week, it did puzzle me somewhat in that the three regulators that have a role in Stronger Super go back well APRA, ASIC and the ATO, and literally between those three APRA is far and away the centre piece regulator. ASIC certainly has a role as does the ATO, but APRA is clearly the main regulator, and I should add these Stronger Super Reforms they date back to the – a lot of people would be familiar with the Cooper Review, they put in a report into the Government led to – or they put recommendations to the Government, some were accepted, most were accepted, some rejected by the Government and then the rest has followed.
Well the ASIC release also talked a lot about I guess a regulatory timeline for documents, so what I guess can we expect from ASIC on that front and when are we expecting to receive it?
That’s unclear and I can’t say even on the law at this stage, and I don’t think ASIC knows, they defer to when the regulations come out, because there are a lot of – a fair chunk of this work relates to materials that we’re still waiting to see in regulations. ASIC’s main role is going to be around disclosure and around the registration of auditors for SMFs, none of which we’ve got clear details on. To be fair I think obviously they’re important things but they are definitely subsidiary to the main game I think that’s happening over with APRA and APRA’s oversight, which is we’re right into now. And APRA’s put out timelines, this is at the large fund end of town if you like, where the trustees need to be thinking about whether they’re building this thing called MySuper, and in fact just to pick up on the ASIC website, they identified, correctly in my view, the three main things that are coming out of Stronger Super are this thing called MySuper, it’s the new Prudential oversight if you like, so it’s raising the bar on the Prudential oversight of superannuation funds generally, not just the big end of town but SMFs as well. And then also this thing called Super Stream, which is all about efficient information flows, and the ATO is the main leader on that, although ASIC will probably have a role. So that’s where we’re at. And right at the moment we’ve got the large funds particularly grappling with building MySuper, what’s it going to look like, adjusting their systems, their structures, their trust deeds all those sort of things because the MySuper thing, to run a MySuper product has to – you have to have an authorisation from APRA, a licence if you like, but it’s – so there’s a process to go through with APRA.
Well I guess the next question is there’s things coming out from I guess APRA, from the ATO and now ASIC, from what you have seen so far are there any major issues or concerns that you have come across?
Oh where do I start? It’s – look the biggest thing that I think is there and this is super high level, is that for trustees of non-SMFs if you like, the SMFs are you know work to rule – not work to rule but just work through things, but the bigger funds, the non-SMFs they’ve got so much on their plate ahead of them to get through to get to 1 July next year, and if they haven’t got a plan in place to get through all that, then they seriously need to get on to one very, very quickly and then work the plan. We were talking earlier, but we’ve been doing presentations for boardrooms and in helping there, I mean there’s many ways to get to the top of the mountain, but we actually put together what we call top down planning and just went right through all the legislation, the things that have to be thought through, and it’s just – it’s mind numbing.
Can you pick out a couple of those major issues or major barriers to get through in order to get there?
Well the MySuper is a big one, okay so that’s hugely out there. The other big one that’s sitting with trustees of super funds which is partly MySuper but it’s much more extensive than MySuper and that is APRA under the Stronger Super Reforms has been given a law making power, Prudential Standards they’re called. And it’s written in draft at this stage Prudential Standards across 11 areas okay, and basically every super fund has to develop policies to comply with these Prudential Standards. And that’s, some people might think oh isn’t that just a matter of getting your lawyers to write something up and put in the drawer, these are trustees of super funds, they have fiduciary responsibilities, not to mention their regulatory responsibilities, so these are things, and a bit like the other point I made there’s many ways to get to the top of the mountain, so director, responsible directors need to say when we’re looking at a governance, we’re looking at risk management, we’re looking at out sourcing of policies, fit and proper policies, remuneration for directors, all that, we should be debating those things, discussing them, formulating the policies, then it gets committed to words, then we review the words that we’ve got in our policy and then by 1 July next year we have to have that implemented, not just written we have to be executing against it. Yeah you do your timelines on that, throw into that business as usual work, in fact before I came over here I was talking to a client what tends to focus the mind for organisations say we don’t want to do that so we better restructure. So we will get some consolidation of super funds I think over the next 12 months and that’s just an additional piece of work that comes on because of a regulatory compliance.
Well I guess just following on from that and I guess just finally, there is so much to do from what you’re saying, and then looking at the ASIC release there’s a lot of consultation that’s upcoming, we’ve got the road show to look forward too, but there is a To Do list, I mean should we be – should we be participating in that consultation and then there’s road shows, or really should we be getting on with the job?
Oh look I think the Government’s view and that of the regulators would be definitely getting on with the job. I mean unfortunately it’s become the nature of things these days, FOFA is another good example, where we get things in tranches and they’re still not law but we’ve got deadlines coming up, if you’re not trying to work up something now you are seriously behind the game. I was at a presentation recently where APRA was speaking and they were making the same noise. The full expectation is even though law is a draft you should be on with the game now.
Well some great insights and we’ll certainly look forward to cracking the whip on industry and making sure we’re ready for that deadline. Thanks again for your time today John.
Pleasure, thanks David.
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