Bills Digest no. 50, 2017–18
PDF version [485KB]
Paula Pyburne
Law and Bills Digests Section
13 November 2017
Contents
The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Structure of this Bills Digest
Background
MySuper and superannuation industry
structure
Initial policy development
Financial system review
Ongoing Productivity Commission
review
Committee consideration
Senate Standing Committee on
Economics
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Schedule 1—MySuper outcomes
assessment
Financial implications
Key provisions
The outcomes test
Stakeholder comments
Schedule 2—authority to offer MySuper
product
Financial implications
Key provisions
Test for authorising
Cancelling an authorisation
Meaning of reason to believe
Schedule 3—director penalties
Financial implications
Key provisions
Contravening director obligations
Additional consequences for directors
Key issues
Schedule 4—approval to own or control
RSE licensee
Financial implications
Key provisions
Application for approval
Approval
Scrutiny of Bills Committee
Directions to relinquish control
Consequences
Court orders
Interim orders
Remedial orders
Suspension or removal of a trustee
Key issues
Schedule 5
Financial implications
Key provisions
General powers
Stakeholder comments
Reasons for exercising the power
Stakeholder comments
Directions to a connected entity
Machinery provisions
Varying or revoking a direction
Offences
Scrutiny of Bills Committee
Protection from liability
Schedule 6—portfolio holdings
disclosure
Financial implications
Key provisions
Disclosure
Stakeholder comments
Exemptions
Stakeholder comments
Schedule 7—annual members’ meetings
Financial implications
Key provisions
Requirement for annual members
meeting
Stakeholder comments
Conduct of the meeting
Stakeholder comments
Obligation to attend
Stakeholder comment
Scrutiny of Bills Committee
Key issues
Schedule 8—reporting standards
Financial implications
Key provisions
Key issues
Concluding comments
Date introduced: 14 September 2017
House: The Senate
Portfolio: Treasury
Commencement: Sections 1–3 on Royal Assent; all Schedules except Schedule 4 on the day after Royal Assent; Schedule 4 three months after Royal Assent.
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.
When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at November 2017.
The Bills Digest at a glance
What the Bill does
The Treasury Laws Amendment (Improving Accountability and
Member Outcomes in Superannuation Measures No. 1) Bill 2017 (the Bill) contains
eight Schedules, each of which makes legislative amendments to achieve eight
separate measures:
- To
replace the current ‘scale test’ with an ‘outcomes test’ which will require
each trustee of a regulated superannuation fund that includes a MySuper product
to make an annual determination on whether the financial interests of the
beneficiaries of the fund are being promoted by the trustee.
- To
give the Australian Prudential Regulation Authority (APRA) improved power to
refuse to authorise a registrable superannuation entity (RSE) licensee to offer
a MySuper product or to cancel an existing authority.
- To
impose civil and criminal penalties on directors of RSE licensees who fail to
execute their responsibilities to act in the best interests of members.
- To
strengthen APRA’s supervision and enforcement powers when a change of ownership
or control of an RSE licensee takes place.
- To
give APRA a broad power to issue a direction to an RSE licensee where APRA has
prudential concerns.
- To
require RSE licensees to make publicly available their portfolio holdings.
- To
require RSE licensees to hold annual members’ meetings.
- To
provide APRA with the ability to obtain information on expenses incurred by RSE
and RSE licensees in managing or operating the RSE.
Committee consideration
The Bill was referred to the Senate Standing Committee on
Economics (Economics Committee) for inquiry and report. The majority of
Senators on the Economics Committee recommended that the Senate pass the Bill.
However, the Labor Senators on the Economics Committee recommended that the
Bill be opposed unless it is amended to apply consistently and comprehensively
across the superannuation system.
Stakeholder views
Some of the measures in the Bill were strongly opposed by
stakeholders. In particular, stakeholders argued that the costs and logistical
difficulties in conducting annual members’ meetings outweighed any perceived
benefit of the measure.
In addition, stakeholders were deeply concerned about
APRA’s proposed power to issue directions and the low threshold test for
exercising that power.
Purpose of
the Bill
The purpose of the Treasury Laws Amendment (Improving Accountability
and Member Outcomes in Superannuation Measures No. 1) Bill 2017 (the Bill) is
to amend a number of statutes to implement eight separate measures which are
intended to improve accountability and transparency of registrable
superannuation entities (RSE) and RSE licensees.
Structure
of the Bill
The Bill contains eight Schedules:
- Schedule
1 amends the Superannuation
Industry (Supervision) Act 1993 (SIS Act) to strengthen the
obligation on superannuation trustees to consider the appropriateness of their
MySuper product offering annually
- Schedule
2 amends the SIS Act to give the Australian Prudential Regulation
Authority (APRA) an enhanced capacity to refuse a registrable superannuation
entity (RSE) licensee a new authority to offer a MySuper product or to cancel
an existing authority
- Schedule
3 amends the SIS Act to impose civil and criminal penalties on directors
of RSE licensees who fail to execute their responsibilities to act in the best
interest of members
- Schedule
4 amends the SIS Act to strengthen APRA's supervision and enforcement
powers when a change of ownership or control of an RSE licensee takes place
- Schedule
5 amends the SIS Act to strengthen APRA's supervision and enforcement
powers to include the power to issue a direction to an RSE licensee where APRA
has prudential concerns
- Schedule
6 amends the Corporations
Act 2001 to refine the requirements for RSE licensees to make publicly
available their portfolio holdings
- Schedule
7 amends the SIS Act to require RSE licensees to hold annual members
meetings and
- Schedule
8 amends the Australian
Prudential Regulation Authority Act 1998 and the Financial Sector
(Collection of Data) Act 2001 to provide APRA with the ability to
obtain information on expenses incurred by RSE and RSE licensees in managing or
operating the RSE.
Structure
of this Bills Digest
As the matters covered by each of the Schedules are
independent of each other, the relevant background, stakeholder comments (where
available) and analysis of the provisions are set out under each Schedule
number.
Background
MySuper and superannuation industry structure
‘MySuper’ is an outcome of the ‘Stronger Super’ package of
measures for the superannuation industry. The ‘Stronger Super’ package of
reforms essentially represents the response to the ‘Super System Review’—commonly
referred to as the Cooper Review—which examined a broad range of issues in the
superannuation industry over the period 2008–2010.[1]
MySuper is one element of the Stronger Super package of
measures and is intended to be a ‘low cost and simple superannuation product
that will replace existing default funds’.[2]
Key regulatory aspects of MySuper superannuation accounts include:
- required
product rules including setting of fees
- single
diversified investment strategy (which may take account of a person’s age)
- selection
of ‘default’ MySuper products in modern awards by a special panel of the Fair
Work Commission
- collection
and publication of comparable MySuper product performance information
- specific
superannuation trustee obligations including satisfying a ‘scale test’[3]
- mandatory
requirements for employers to make contributions for employees who have not
made a choice of fund to a fund that offers a MySuper product by 1 January
2014 and
- the
transfer of existing ‘default’ superannuation balances where the member has not
exercised choice of superannuation fund into a MySuper account by 1 July
2017.[4]
The MySuper reforms were brought about by a number of
enactments, including but not limited to:
At the time of writing this Bills Digest, 117 Registrable
Superannuation Entities (RSEs) had an authorised MySuper product.[5]
Initial policy development
The Labor Government’s initial response to the Cooper
Review in December 2010 broadly endorsed its recommendations relating to the
development of a ‘simple, cost‐effective product with a diversified
portfolio of investments for the vast majority of Australian workers who are
invested in the default option of their current fund’.[6]
The policy requiring superannuation funds to transfer the
accrued balances of default members to a MySuper product by 1 July 2017
was part of the Labor Government’s more detailed response to the Cooper Review
in September 2011.[7]
According to the Minister for Revenue and Financial
Services, Kelly O’Dwyer, ‘many of the measures in this package have been
recommended by past reviews into superannuation, commissioned by both Coalition
and Labor governments’.[8]
Financial system review
In November 2013, then Treasurer, Joe Hockey, announced an
inquiry into Australia’s financial system (known as the Murray Review after the chair of the
review, former CEO of the Commonwealth Bank David Murray AO).[9]
The Final Report of the Murray Review noted that there was
scope to improve the efficiency of the superannuation system in a number of
areas.
Substantially higher superannuation balances and fund
consolidation over the past decade have not delivered the benefits that would
have been expected; these benefits have been offset by higher costs elsewhere in
the system rather than being reflected in lower fees.[10]
Some of the amendments in the Bill reflect recommendations
made by the Murray Review.
Ongoing Productivity
Commission review
In 2016, the Australian Government asked the Productivity
Commission to undertake a review of the competitiveness and efficiency of the
Australian superannuation system.[11]
The review is being undertaken in three stages:
- Stage
1 developed a framework for assessing the competitiveness and efficiency of the
superannuation system, which forms the basis for the assessment in
stage 3. The final report for stage 1 was published in November 2016.
- Stage
2 examines alternative models for a formal competitive process for allocating
default fund members to default superannuation products.
- The
stage 2 inquiry will be incorporated into and finalised as part of the stage 3
inquiry by June 2018.[12]
It is likely that further amendment to superannuation laws
will arise from the ongoing review by the Productivity Commission.
That being the case, the question arises as to whether the
Bill pre-empts the work that is underway by the Productivity Commission’s
review into superannuation and default models. The danger is:
... [that] fragmented and piecemeal introductions of new standards
may result in regulatory inefficiency, duplication in consumer and industry
standards, increase consumer confusion in navigating the system as well as
impose additional costs on businesses in complying with the new laws and
regulations.[13]
Committee
consideration
Senate
Standing Committee on Economics
This Bill (along with the Superannuation
Laws Amendment (Strengthening Trustee Arrangements) Bill 2017)[14]
was referred to the Senate Standing Committee on Economics (the Economics
Committee) for inquiry and report by 23 October 2017.[15]
The Economics Committee received 38 submissions. The majority of Senators on
the Economics Committee recommended that the Senate pass the Bill.[16]
However, the Labor Senators on the Economics Committee recommended that the
Bill be opposed unless it is amended to apply ‘consistently and comprehensively
across the superannuation system’.[17]
The matters raised by submitters are canvassed under the
relevant Schedule heading below.
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
(Scrutiny of Bills Committee) considered the Bill in its scrutiny digest of 18 October
2017. The Scrutiny of Bills Committee raised issues about strict liability
offences and about significant matters which are to be contained in delegated
legislation.[18]
These issues are canvassed under the relevant schedule heading below.
Policy position
of non-government parties/independents
The position of the Australian Labor Party (Labor) in
relation to the Bill can be gleaned from the dissenting comments made by the
Labor members of the Economics Committee. In particular, the Labor Senators
recommended that the Bill be opposed unless it is amended to apply
‘consistently and comprehensively across the superannuation system’—rather than
merely to MySuper products.[19]
Senator Xenophon of South Australia NXT was a member of
the Economics Committee and did not dissent from the majority view.[20]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[21]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considered
the Bill but has reported that it did not raise human rights concerns.[22]
Schedule 1—MySuper
outcomes assessment
Quick guide to Schedule 1
Under the SIS Act, only an authorised MySuper
product is eligible to operate as a default product for employees who do not
choose a fund to receive their mandatory superannuation contributions.
Because of their default nature, MySuper products are subject to higher performance
requirements.
Under the amendments in Schedule 1 to the Bill, trustees
will be required to assess on an annual basis whether the outcomes that are
being delivered are promoting the financial interests of their MySuper
members. The amendments replace the existing ‘scale test’ with a broader
‘outcomes test’.
|
Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 1 will have nil financial impact.[23]
Key
provisions
Where an individual does not actively choose a
superannuation fund, their employer must pay their superannuation amounts into
a superannuation fund that offers MySuper. Part 2C of the SIS Act establishes
MySuper products as simple products sharing common characteristics.[24]
Within Part 2C, section 29VN of the SIS Act sets
out trustee obligations relating to MySuper—including the ‘scale test’ which
requires trustees of a superannuation fund that includes a MySuper product to
determine on an annual basis whether the beneficiaries of the fund who hold the
MySuper product are disadvantaged, in comparison to the beneficiaries of other
funds who hold a MySuper product within those other funds, based on the number
of members or assets in the MySuper product or fund.[25]
The
outcomes test
Item 2 of Schedule 1 to the Bill repeals and
replaces paragraph 29VN(b) to remove the scale test and insert an ‘outcomes
test’. Proposed paragraph 29VN(b) will require each trustee of a
regulated superannuation fund that includes a MySuper product to determine, in
writing, on an annual basis whether the financial interests of the
beneficiaries of the fund who hold the MySuper product are being promoted by
the trustee, having regard to a comparison of the MySuper product with other
MySuper products and the factors which are listed in proposed subsection
29VN(2) being:
- whether
the options, benefits and facilities offered under the MySuper product are
appropriate to those beneficiaries
- whether
the investment strategy for the MySuper product, including the level of
investment risk and the return target, is appropriate to those beneficiaries
- whether
the insurance strategy for the MySuper product is appropriate to those
beneficiaries
- whether
any insurance fees charged in relation to the MySuper product inappropriately
erode the retirement income of those beneficiaries
- whether
there are problems of scale in relation to the MySuper product:
- because
the number of beneficiaries of the fund who hold the MySuper product or the number
of beneficiaries of the fund per se is insufficient or
- where
the assets of the fund that are attributed to the MySuper product are, or are
to be, pooled with other assets of the fund or assets of another entity—because
that pool of assets is insufficient or because the assets of the fund that are
attributed to the MySuper product are insufficient
- any
other relevant matters, including matters prescribed by regulations.[26]
When comparing the fund’s MySuper product with other
MySuper products the trustees must compare each of the following:
- the
fees and costs that affect the return to the beneficiaries holding the MySuper
products
- the
return target and actual return for the MySuper products
- the
level of investment risk for the MySuper products and
- any
other matter prescribed by regulations.[27]
The trustee must publish on the website of the regulated
superannuation fund its determination of the outcomes test within 28 days after
the determination is made. The determination and the summary of the assessments
and comparisons on which the determination is based are to remain on the
website until a subsequent determination is made.[28]
According to the Law Council of Australia the obligation
in proposed subsection 29VN(3) to compare the fund’s MySuper product
with other MySuper products:
... may be inherently problematic because funds operate in
different sectors and for different types of members. At worst, this could
incentivise trustees to breach their current duty to formulate investment
strategies which are suitable for their membership and their funds
circumstances.[29]
Stakeholder
comments
The Association of Superannuation Funds of Australia (AFSA)
acknowledged the need for the regulators of the superannuation system to ‘have
appropriate powers and instruments to ensure that the system is stable,
efficient and delivers on its objectives’.[30]
However, AFSA opposes the requirement to publish the trustees’ determination
that it has satisfied the outcomes test because, amongst other things:
- it
duplicates the information in the MySuper dashboard that is prescribed by the
Australian Securities and Investments Commission (ASIC)[31]
- there
is no clear benefit for members
- there
is a cost and resource burden for trustees and
- it
creates confusion in the regulatory jurisdiction of APRA and ASIC because the
outcomes test sits more squarely in the realm of consumer disclosure than it
does in prudential regulation.[32]
Similarly the Corporate Superannuation Association (CSA)
does not support the new outcomes assessment on the grounds that it will
‘affect smaller funds and their members more severely than larger entities’. In
addition, the process to be followed in making the assessment may give rise to
a ‘risk that trustees will converge towards extremely cautious strategies to
avoid investment risk’ resulting in an ‘adverse comparison in any year’.[33]
Mercer supports the proposed annual MySuper outcomes
assessment but not the proposal that the trustees’ determinations be publicly
available. They would prefer that the determination was ‘provided to APRA on a
confidential basis’.[34]
Essentially then, whilst stakeholders supported the
proposed outcomes test, many ‘queried whether the test should apply to all
superannuation products; what value it would add;[35]
and whether it could be improved’.[36]
Schedule 2—authority
to offer MySuper product
Quick guide to Schedule 2
APRA is a prudential regulator; essentially its role is to
minimise the risk that the entities it regulates will be unable to fulfil
their promises. In doing so APRA promotes the interests of the beneficiaries
of those entities (for instance, superannuation fund members) as well as the
stability of the financial system.[37]
Section 11 of the Australian
Prudential Regulation Authority Act 1998 confers on APRA the power to
do anything that is necessary or convenient to be done for, or in connection
with, the performance of its functions. Accordingly, APRA is empowered to
authorise an RSE licensee to offer a MySuper product. The amendments in Schedule
2 to the Bill allow APRA to refuse to authorise an RSE licensee to offer a MySuper
product or to cancel an existing authority.
|
Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 2 will have nil financial impact.[38]
Key
provisions
Test for
authorising
Currently, section 29T of the SIS Act, provides
that APRA must authorise an RSE licensee to offer a MySuper product
provided that specified circumstances are satisfied. Amongst other things, the
test to be applied by APRA is whether it is satisfied:
- the
RSE licensee, the individual trustees or the directors of the RSE licensee are likely
to comply with the enhanced trustee obligations and director obligations
(respectively) for MySuper products[39]
- the
RSE licensee or each individual trustee is likely to comply with the relevant
fees rules[40]
and
- the
RSE licensee is not likely to contravene certain specified sections of
the SIS Act.[41]
Item 1 of Schedule 2 to the Bill repeals existing paragraphs
29T(1)(h), (ha), (i) and (j) and substitutes proposed paragraphs 29T(h)–(k)
so that the test to be applied in deciding whether to authorise an RSE licensee
to offer a MySuper product is that APRA has no reason to believe that the
RSE licensee (where the RSE licensee is made up of a group of individual
trustees, the individual trustees) and the directors of an RSE licensee that is
a body corporate may:
- fail
to comply with the enhanced trustee obligations for MySuper products[42]
- fail
to comply with the enhanced director obligations for MySuper products[43]
- fail
to comply with the general fees rules and the fees rules in relation to MySuper
products[44]
- contravene
the specified sections of the SIS Act.[45]
Cancelling
an authorisation
Existing subsection 29U(1) provides that APRA may cancel
an authority to offer a MySuper product. While not restricting this general discretion,
subsection 29U(2) provides that APRA may cancel such an authority if it is no
longer satisfied about certain matters.
Item 2 of Schedule 2 to the Bill repeals and
replaces paragraphs 29U(2)(c), (ca), (d) and (e) of the SIS Act to
reframe the wording of these provisions. The amendments operate so that the
circumstances in which APRA may cancel an authority to offer a MySuper product
include where APRA has reason to believe that the RSE licensee (where the
RSE licensee is made up of a group of individual trustees, the individual
trustees) and the directors of an RSE licensee that is a body corporate:
- may
not comply with the enhanced trustee obligations for MySuper products (whether
because of a previous failure to do so, or for any other reason)[46]
- may
not comply with the enhanced director obligations for MySuper products[47]
- may
not comply with the general fees rules and the fees rules in relation to
MySuper products[48]
or
- may
contravene the specified sections of the SIS Act.[49]
Meaning of
reason to believe
In WA Pines Pty Ltd v Bannerman[50]
Lockhart J had this to say in relation to the requirement to have a ‘reason to
believe’ in the context of section 155 of the then Trade Practices Act 1974:
In my opinion, the words "has reason to believe" in
sub-s.155 (1) imply actual belief ... Words such as these are found frequently in
legislation or regulations conferring powers on Ministers of the Crown or
public servants. They must be read as limiting otherwise arbitrary powers. If they
are to be read as empowering the person in whom the power is vested, to
determine conclusively whether the limitation has been satisfied, the value of
the intended limitation is nugatory.
Plainly, the power must not be exercised dishonestly or in
bad faith ... In my opinion the words "has reason to believe . . ."
mean that the Commission must believe that a person is capable of furnishing
information, producing documents or giving evidence; and there must be
reasonable grounds or cause for that belief, before the powers ... may be
exercised.[51]
Essentially this is one of the least controversial of the
measures in the Bill. It strengthens APRA’s existing power to authorise an RSE licensee
to offer a MySuper product as well as the existing power to cancel an authorisation.
Schedule 3—director
penalties
Quick guide to Schedule 3
At present, superannuation directors are not subject to
criminal or civil penalties in relation to their duty to act in the best
interests of members. A member who has incurred loss or damage as a result of
director misconduct can seek recovery through civil action—or APRA can
disqualify the director. This is inconsistent with the regime applying to the
directors of responsible entities of managed investment schemes under the Corporations Act
2001 who are subject to criminal and civil penalties.[52]
Schedule 3 imposes civil and criminal penalties on
directors of RSE licensees who fail to execute their responsibilities.
|
Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 3 will have nil financial impact.[53]
Key
provisions
Contravening director obligations
As stated in Schedule 1 to the Bill above, section 29VN of
the SIS Act imposes additional obligations on a trustee in
relation to a MySuper product. With the enactment of the amendments in Schedule
1, these will include the requirement for trustees to assess, on an annual
basis, whether the outcomes that are being delivered are promoting the
financial interests of their MySuper members.
Section 29VO of the SIS Act imposes additional
obligations on a director of a corporate trustee in relation to a
MySuper product. In particular, the section requires each director to exercise
a reasonable degree of care and diligence for the purposes of ensuring that the
corporate trustee carries out the obligations contained in section 29VN.
The existing law provides that a director must not
contravene section 29VO.[54]
If a contravention occurs and results in loss or damage to another person, that
person may, with the leave of the court, recover the amount of the loss or
damage by action against the director or against any person involved in the
contravention.[55]
Item 1 of Schedule 3 to the Bill repeals and
replaces subsection 29VPA(2) of the SIS Act so that the prohibition on contravening
section 29VO is a civil penalty provision and gives rise to civil and criminal
consequences for the person who is contravening or who is involved in a
contravention of, subsection 29VO(1) of the SIS Act.[56]
Additional consequences for directors
Part 6 of the SIS Act contains provisions relating to
the governing rules of superannuation entities. Essentially, if the governing
rules of an RSE do not contain covenants which are equivalent to those set out
in Part 6, the relevant covenants are taken to be contained in
the governing rules.[57]
Within Part 6, section 52 sets out the covenants that apply to the trustees of
an entity. Section 52A of the SIS Act sets out in near equivalent form
those covenants relating to directors that are to be included in the governing
rules of an RSE. These include, amongst other things the duty to:
- act
honestly in all matters concerning the entity[58]
- exercise
the same degree of care, skill and diligence as a prudent superannuation director
would exercise[59]
- perform
the director’s duties and exercise the director’s powers in the best interests
of the beneficiaries[60]
and
- if
there is a conflict between the duties of the director to the beneficiaries and
the duties of the director to any other person the director is to give priority
to the duties to and interests of the beneficiaries.[61]
This duty overrides any conflicting obligations under certain other statutes.[62]
Item 2 of Schedule 3 to the Bill inserts proposed
section 55AA into the SIS Act. A person must not contravene a
covenant that is set out in subsection 52A and contained, or taken to be
contained, in the governing rules of a superannuation entity.[63]
The prohibition on contravening such a covenant is a civil penalty provision
and gives rise to civil and criminal consequences for the person who is
contravening or who is involved in the contravention of proposed subsection
55AA(1).[64]
Key issues
The key issue for stakeholders is that the Bill
anticipates that the SIS Act will contain two parallel systems for
holding RSE licensee directors accountable. Not only does the possibility
of being personally sued for loss and damage in the event that a director breaches
the requirement to exercise a reasonable degree of care and diligence remain; but
new civil and criminal penalties may be imposed for the same contravention.
The rationale for this measure is that the Final Report of
the Murray Review recommended that the penalty regime for directors of trustees
set out in the SIS Act should be aligned with the penalty regime
applying to directors of responsible entities of managed investment schemes
under Chapter 5C of the Corporations Act.[65]
According to the Law Council of Australia:
Directors of superannuation trustees will be exposed to a
higher degree of liability than any other directors in Australia ... The high
degree of exposure will be an obstacle to procuring independent professional
directors on superannuation trustee boards.[66]
The provisions in Schedule 3 to the Bill do not align the
provisions of the SIS Act with those of Chapter 5C of the Corporations
Act as recommended.
Under the relevant provisions of the Corporations Act,
directors of a responsible entity have no direct liability to individual scheme
members for a breach of their statutory duties. Once the court makes a
declaration that a civil penalty provision is breached,[67]
ASIC can seek a pecuniary penalty if the breach is serious and materially
prejudices the interests of the scheme or its members.[68]
In addition, the court may order compensation to be paid to the scheme on
application by ASIC or the responsible entity.[69]
Schedule 4—approval
to own or control RSE licensee
Quick guide to Schedule 4
The amendments in Schedule 4 to the Bill increase APRA's
supervision and enforcement powers when a change of ownership or control of
an RSE takes place by giving APRA the power to:
- refuse
authority for a change in ownership or control where it has concerns about
the person seeking ownership or control
- give
a direction to a person to relinquish control of an RSE licensee and
- remove
or suspend an RSE licensee where it is subject to the control of its owner.
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Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 4 will have nil financial impact.[70]
Key
provisions
Item 8
of Schedule 4 to the Bill inserts proposed Division 8—Approval to hold a
controlling stake in an RSE licensee into Part 2A (licensing of trustees
and groups of individual trustees) of the SIS Act. Proposed Division
8 only applies to an RSE licensee
that is a body corporate.[71]
For the purposes of proposed Division 8, a
person holds a controlling stake in an RSE licensee that is a
body corporate if the person holds a stake of more than 15 per cent
in the RSE licensee.[72]
The amendments set out in Schedule 4 to the Bill are
intended to address issues which became apparent following the inquiry into the
collapse of Trio Capital.
... a number of investment vehicles operated by Trio Capital
appear not to have been legitimate investments but merely conduits through
which investors’ money was stolen. In November 2003, a reputable funds manager,
Tolhurst, was acquired by new owners; it now appears that they made this
acquisition with a view to defrauding Australian investors (particularly
superannuation investors) of substantial sums of money.[73]
Application for approval
The Bill
provides that a person may apply to
APRA for approval to hold a controlling stake in an RSE licensee
by making an application in the approved manner and form and containing the
required information.[74]
APRA must make a decision within 90 days after receiving
the application or 90 days after receiving any additional information that has
been requested from the person—although APRA may extend the decision making period
by up to 30 days provided that APRA informs the person of the extension, in
writing, within 90 days after receiving the application.[75]
If APRA has not made a decision to approve a person to
hold a controlling stake in an RSE licensee by the end of the relevant period,
APRA is deemed to have decided to refuse the application.[76]
Approval
Where a person has satisfied all the application
requirements, APRA must give approval for the person to hold a
controlling stake in an RSE licensee if it has no reason to believe that
the RSE licensee may be unable to satisfy one or more of the trustee’s
obligations due to the person’s controlling stake in the RSE licensee, or the
way in which that controlling stake is likely to be used.[77]
In that case, APRA must notify the RSE licensee in writing of the approval.[78]
Where APRA has decided to refuse an application for
approval to hold a controlling stake in an RSE licensee, it must take all
reasonable steps to ensure that the person is given a notice to that effect, setting
out the reasons for the decision, as soon as practicable after refusing the
application.[79]
Item 9 of Schedule 4 to the Bill inserts proposed section 29JCB into
the SIS Act so that a person commits an offence of strict liability if
the person holds a controlling stake in an RSE licensee but does not have
approval from APRA to do so.[80]
The maximum penalty for the offence is 400 penalty units for each day on
which the person holds a controlling stake in the RSE licensee without
approval.[81]
This section applies where a person begins to hold a
controlling stake in an RSE licensee on or after the day that is three months after
the day that Schedule 4 commences.[82]
Scrutiny of
Bills Committee
The Scrutiny of Bills Committee noted that proposed
section 29JCB introduces a strict liability offence with a maximum penalty of
400 penalty units for each day on which the person holds a controlling stake
without approval. Of concern to the Scrutiny of Bills Committee was that the Guide
to Framing Commonwealth Offences states that strict liability should be
applied only where the penalty does not include imprisonment and a fine does
not exceed 60 penalty units for an individual (or 300 penalty units for a body
corporate).[83]
Given that the proposed offence is subject to a maximum
penalty of 400 penalty units applicable on each day of the contravention, the Scrutiny
of Bills Committee has requested the Minister’s justification of the proposed
penalty.[84]
Directions to relinquish control
Item 10
of Schedule 4 to the Bill inserts proposed Division 2 into Part 16A of
the SIS Act. Note that Division 1 of Part
16A—APRA’s powers to issue directions is
inserted by item 11 of Schedule 5 to the Bill and is discussed under the
relevant heading below.
The Bill
empowers APRA to give a person a direction to relinquish control of
an RSE licensee in a range of circumstances.
The first circumstance is where APRA has reason to
believe the person has a controlling stake in, or practical control of the RSE
licensee and because of the person’s controlling stake, or practical control,
of the RSE licensee or the way in which control has been, is, or is likely to
be exercised the RSE licensee has been, is or is likely to be unable to satisfy
one or more of the trustee’s obligations.[85]
The Bill provides that a person has practical
control over an RSE licensee that is a body corporate where the person
does not hold a controlling stake and either:
- the
directors of the RSE licensee are accustomed or under an obligation, whether
formal or informal, to act in accordance with the directions, instructions or
wishes of the person[86]
or
- the
person (either alone or together with associates) is in a position to exercise
control over the RSE licensee.[87]
The second circumstance is where APRA has reason to
believe that the person has a controlling stake in the RSE licensee but does
not hold the relevant approval to do so.[88]
The third circumstance is where APRA has reason to
believe that the person who has been approved to hold a controlling stake in
the RSE licensee gave APRA information in relation to the application for
approval that was false or misleading in a material particular.[89]
The direction to relinquish a controlling stake in the RSE
licensee must be given in writing along with a statement of reasons for giving
the direction.[90]
The direction to relinquish control may be revoked, in writing, by APRA.[91]
Consequences
Within 90 days (known as the compliance period)
of being given a direction to relinquish a controlling stake in the RSE a
person must take such steps as are necessary to ensure that:
- the
directors of the RSE licensee are not obliged to act in accordance with the
directions, instructions or wishes of the person
- the
person is not in a position to exercise control over the RSE licensee and
- the
person does not hold a controlling stake in the RSE licensee.[92]
A person who has been given a direction to relinquish a
controlling stake in the RSE commits an offence if the person intentionally or
recklessly contravenes the requirement. The maximum penalty for the offence is 400
penalty units for each day on which the person holds a controlling stake
in the RSE licensee without approval.[93]
Court orders
A person who has been given a direction to relinquish
control over an RSE licensee may make an application to the Administrative
Appeals Tribunal (AAT) for a review of the decision.[94]
In that case, it is open to the AAT to make an order staying or otherwise
affecting the implementation of the direction.[95]
Interim orders
The Bill empowers APRA to apply to the Federal Court for
an order to prevent the person, for the duration of any AAT stay, from exercising
control over the RSE licensee in a manner that results in the RSE licensee
being unable to satisfy one or more of the trustee’s obligations.[96]
APRA may also apply to the Federal Court for orders where
it has reason to believe that the person may exercise control over the RSE
licensee in a manner that results in the RSE licensee being unable to satisfy
one or more of the trustee’s obligations, during the compliance period.[97]
Remedial orders
If a direction to relinquish control over an RSE licensee
is in force, APRA may apply to the Federal Court for the following orders:
- an
order directing the disposal of shares
- an
order restraining the exercise of any rights attached to shares
- an
order prohibiting or deferring the payment of any sums due to a person in
respect of shares held by the person or
- an
order that any exercise of rights attached to shares be disregarded.[98]
Those orders may only be made on application by APRA and
where the Federal Court is satisfied of relevant matters in relation to a
person who holds a controlling stake in, or has practical control of, the RSE
licensee and which are listed in the Bill.[99]
Suspension
or removal of a trustee
Currently, section 133 of the SIS Act sets out the
circumstances in which APRA may suspend or remove a trustee of a superannuation
entity. Item 11 of Schedule 4 to the Bill inserts two additional
circumstances, being that APRA has reason to believe:
- either
a person holds a controlling stake in, or has practical control of, the RSE
licensee and because of the person’s control of the RSE licensee, or the way in
which that control has been, is or is likely to be exercised, the RSE licensee
has been, is or is likely to be unable to satisfy one or more of the trustee’s
obligations[100]
or
- a
person holds a controlling stake in an RSE licensee but does not have approval to
do so.[101]
Key issues
An order directing the disposal of shares—that is, the
compulsory divestment of shares—is unusual but not unknown in Australian law. The
Financial Sector
(Shareholdings) Act 1998 is in similar terms. It provides that:
- if a person holds a stake in a financial sector company that
exceeds the allowed percentage (that is, 15 per cent or a higher
percentage approved by the Treasurer), the Federal Court may make orders to
ensure that the situation ceases to exist and
- a person who holds a stake of no more than 15 per cent of a
financial sector company may be declared by the Treasurer to have practical
control of the company. The person must then take steps to end that control.[102]
Under the Foreign
Acquisitions and Takeovers Act 1975 (FATA), a significant
action is an action to acquire interests in securities, assets or
Australian land, or otherwise take action in relation to entities (being
corporations and unit trusts) and businesses, that have a connection to
Australia that results in a change in control involving a foreign person or
control being assumed by a foreign person.[103]
The FATA empowers the Treasurer—in certain
circumstances mostly related to breaching certain obligations under that Act
(such as seeking approval to make the acquisition)—to make a disposal order (for
example, the disposal of shares acquired by the foreign person) where the result
of the significant action is contrary to the national interest. In this regard,
the ability of APRA to order the disposal of shares is similar in that it
arises in circumstances where certain obligations have been breached, including
a failure to obtain approval to hold a controlling stake in the RSE.
Schedule 5
Quick guide to Schedule 5
The amendments in Schedule 5 to the Bill strengthen APRA’s
supervision and enforcement powers by giving APRA the power to issue a
direction to an RSE licensee where APRA has prudential concerns.
They enable APRA to intervene at an early stage to address
prudential concerns in a manner that ensures the required actions are in the
best interests of members.[104]
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Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 5 will have nil financial impact.[105]
Key
provisions
Item 11 of Schedule 5 to the Bill inserts proposed
Part 16A—APRA’s powers to issue directions into the SIS Act.[106]
General powers
The Bill
gives APRA a very broad power to direct an RSE licensee to do one or more
of the following:
- to
comply with the whole or a part of the SIS Act, Superannuation
Industry (Supervision) Regulations 1994, the prudential standards or the Financial Sector
(Collection of Data) Act 2001
- if
the RSE licensee is a body corporate, to do one or more of the following:
- to
remove a responsible officer of the RSE licensee from office
- to
ensure that a responsible officer of the RSE licensee does not take part in the
management or conduct of the business of the RSE licensee, or the business of a
registrable superannuation entity of the RSE licensee, except as permitted by
APRA
- to
appoint a person as a responsible officer of the RSE licensee for such term as
APRA directs
- to
order an audit of the affairs of the RSE licensee or the affairs of a RSE of
the licensee at the expense of the RSE licensee, by an auditor chosen by APRA
- to
remove an auditor of the RSE licensee, or of a RSE, from office and appoint
another auditor to hold office for such term as APRA directs
- to
order an actuarial investigation of the affairs of a registrable superannuation
entity of the RSE licensee, at the expense of the RSE licensee and by an
actuary chosen by APRA
- to
remove an actuary of a registrable superannuation entity of the RSE licensee
from office and appoint another actuary to hold office for such term as APRA
directs
- not
to accept, or to cease to accept (permanently or temporarily), contributions to
a registrable superannuation entity of the RSE licensee
- not
to borrow any amount
- not
to pay or transfer any amount or asset to any person, or create an obligation
(contingent or otherwise) to do so
- not
to undertake any financial obligation (contingent or otherwise) on behalf of
any other person
- not
to discharge any liability of the RSE licensee or a registrable superannuation
entity of the RSE licensee
- to
make changes to the RSE licensee’s systems, business practices or operations
(including the RSE licensee’s systems business practices or operations in
relation to a registrable superannuation entity of the RSE licensee)
- to
do, or refrain from doing, anything else in relation to the affairs of the RSE
licensee or a registrable superannuation entity of the RSE licensee.[107]
The direction may deal with the time by which, or period
during which, it is to be complied with.[108]
Stakeholder comments
The key issue for most stakeholders
in relation to the measures in Schedule 5 to the Bill is that the powers
proposed in the Bill ‘go beyond what is reasonably necessary to resolve or
address prudential concern’.[109]
In general, stakeholders considered
that the range of directions that APRA could make is too wide.[110] According to Dr Scott Donald of the University of New South
Wales, APRA's response to a situation should be directed towards, or be
proportionate to, the risks or potential costs of the situation. He suggested
that limiting the directions power to crisis situations may partly address this
concern—although doing so would reduce the capacity of APRA to employ a
proportionate response to less severe situations.[111]
It was suggested that in order to
limit the risks inherent in such a power, APRA should, in most cases, be
required to afford trustees with a reasonable opportunity to respond and submit
argument prior to the formal direction being applied.[112] However the Bill does not specifically require this.
Reasons for exercising the power
APRA may only exercise the power to give a direction if it
has reason to believe that:
- the
RSE licensee has contravened a provision of the SIS Act, the regulations,
the prudential standards or the Financial Sector (Collection of Data) Act
- the
RSE licensee is likely to contravene a provision of any one of the above—and
the direction is reasonably necessary to deal with one or more prudential
matters in relation to the RSE licensee
- the
RSE licensee has contravened a condition or direction under the SIS Act or
the Financial Sector (Collection of Data) Act
- the
direction is necessary in the interests of beneficiaries of a registrable
superannuation entity of the RSE licensee
- the
RSE licensee is, or is about to become, unable to meet its liabilities (whether
as trustee of a registrable superannuation entity or otherwise)
- there
is, or there might be, a material risk to the security of the assets of the RSE
licensee (whether held as trustee of a registrable superannuation entity or
otherwise)
- there
has been, or there might be, a material deterioration in the financial
condition of the RSE licensee or a registrable superannuation entity of which
it is trustee
- the
RSE licensee is conducting its affairs or the affairs of a registrable
superannuation entity of which it is trustee in an improper or financially
unsound way
- the
failure to issue a direction would materially prejudice the interests or
reasonable expectations of beneficiaries of a registrable superannuation entity
of the RSE licensee
- the
RSE licensee is conducting its affairs or the affairs of a RSE of which it is trustee
in a way that may cause or promote instability in the Australian financial
system.[113]
Stakeholder comments
Stakeholders considered that the power
granted to APRA was too extensive. Of concern was that the requirement for APRA
to have ‘reason to believe’ may be satisfied by the presence of a single,
perhaps not even compelling, reason.[114] The Economics Committee noted the concerns put forward by Industry
Super Australia in its submission:
The breadth of the expansion, the
sensitivity of the powers to discretion, and the fact that some of the powers
are not prudential in nature mean that the powers could achieve both good
outcomes as well is bad ones, with little public safeguards to ensure the
former. As a result, the proposals are not without risks.[115]
And further:
... it is unclear what type of matter would cause APRA to form
the view that it must issue a direction because it is “necessary in the interests
of beneficiaries”. A nebulous directions power is problematic because the
provision is capable of being understood in more ways than one, lending itself
to various interpretations by different individuals. The lack of clarity about
the application of this reform limits the effectiveness of the provision.[116]
Essentially, there is a disconnect
between the Explanatory Memorandum, which states that the directions power in
the Bill may be exercised ‘where APRA has prudential concerns’ and the actual terms
of proposed subsection 131D(1) which allow
for the exercise of the directions power for reasons which are not explicitly
prudential.[117]
Directions to a connected entity
Section 10 of the SIS Act
defines a connected entity, in
relation to an RSE licensee of a registrable superannuation entity as a
subsidiary of the RSE licensee (where the RSE licensee is a body corporate) and
any other entity of a kind prescribed by the regulations. The Bill contains a
similar direction making power for APRA in relation to the conduct of a
connected entity of an RSE licensee.[118]
Machinery provisions
A direction must be given by notice in writing to the RSE
licensee or to the connected entity of the RSE licensee and the relevant RSE
licensee. The written notice must set out the grounds on which the direction is
given.[119]
In deciding whether to give a direction under proposed subsection 131D(1)
to an RSE licensee or under proposed subsections 131DA(1) or (3)
to a connected entity and the relevant RSE, APRA may disregard any external
support for the RSE licensee.[120]
According to the Explanatory
Memorandum to the Bill:
External support includes particular guarantees or
assurances, and are required to support the stability of the superannuation
system. For example, the provision of external support to a stressed entity in
some form of temporary public support would not fetter the ability of APRA to
determine that the preconditions are met for giving a direction to the entity.[121]
A direction under Division 1 (the
general powers) of proposed Part 16A—APRA’s powers to issue
directions is not a legislative instrument.[122]
Varying or
revoking a direction
APRA may vary a direction given to an RSE licensee or to a
connected entity of an RSE licensee by notice in writing to the RSE licensee or
to the connected entity and the relevant RSE licensee if, at the time of the
variation, APRA considers that the variation is necessary and appropriate.[123]
Similarly, APRA may revoke a direction given to an RSE
licensee or to a connected entity of an RSE licensee by notice in writing to
the RSE licensee or to the connected entity and the relevant RSE licensee if at
the time of the revocation, APRA considers that the direction is no longer
necessary or appropriate.[124]
Offences
A person commits
an offence of strict liability if the person is an RSE licensee or a member of
a group of individual trustees that is an RSE licensee and the RSE licensee
does, or fails to do, something that results in a contravention of a direction.[125]
In that case, the penalty is 100 penalty units.[126]
The Bill inserts three additional strict liability
offences for a failure to comply with a direction given to an RSE licensee by:
- an officer of the RSE licensee who fails to take reasonable steps to
ensure that the RSE licensee complies with a direction[127]
- a connected entity of an RSE licensee which does, or fails to do,
something that results in a contravention of a direction[128]
and
- an officer of a body corporate that is a connected entity of an RSE
licensee where the officer fails to take reasonable steps to ensure that the
connected entity complies with the direction.[129]
If a person commits any of the offences outlined above, the
person commits an offence in respect of the first day on which the offence is
committed and on each subsequent day on which the circumstances that gave rise
to the person committing the offence continues.[130]
Scrutiny of
Bills Committee
The Scrutiny of Bills Committee noted that proposed
section 131DD introduces a strict liability offence with a maximum penalty
of 100 penalty units for each day on which the person fails to comply with a
direction given by APRA to an RSE licensee or a connected entity. Of concern to
the Scrutiny of Bills Committee was that the Guide to Framing Commonwealth
Offences states that strict liability should be applied only where the
penalty does not include imprisonment and a fine does not exceed 60 penalty
units for an individual (or 300 penalty units for a body corporate).[131]
Given that the proposed offence is subject to a maximum
penalty of 100 penalty units applicable on each day of the
contravention, the Scrutiny of Bills Committee has requested the Minister’s
justification of the proposed penalty.[132]
Protection from liability
The Bill contains a general protection from liability that
would otherwise arise from any act or omission of a person who has performed in
good faith and without negligence in complying with the SIS Act.[133]
In addition the Bill sets out a protection from liability
for something done or not done in compliance with a direction given by APRA to
an RSE licensee or a connected entity.[134]
Schedule 6—portfolio
holdings disclosure
Quick guide to Schedule 6
Schedule 6 to the Bill amends the Corporations Act to
ensure that superannuation fund members, and others including financial
analysts, have access to publicly available information about the portfolio
holdings of superannuation funds.
|
Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 6 will have nil financial impact.[135]
Key
provisions
Currently, section 1017BB of the Corporations
Act sets out the obligations of trustees of registrable superannuation
entities to make information relating to the investment of their assets
publicly available on their website.
Disclosure
Item 1 of Schedule 6 to the Bill repeals and
replaces subsection 1017BB(1) of the Corporations Act. Proposed
subsection 1017BB(1) introduces a new term—disclosable item
being each investment item allocated to an investment
option.[136]
The Bill imposes an obligation on the trustee, or the
trustees, of a RSE to make publicly available on its website specified information
about each of the entity’s investment options. This must be done no later than
90 days after each reporting day.[137]
The information to be disclosed is:
- sufficient
information to identify each investment item allocated to the investment option
at the end of the reporting day that is held by the reporting entity or an
associated entity of the reporting entity; and is not an investment in an
associated entity of the reporting entity
- sufficient
information to identify the value, and the weighting or exposure, at the end of
the reporting day of each disclosable item and
- the
total value, and the total weighting or exposure, at the end of the reporting
day of all disclosable items.[138]
The regulations may prescribe a kind of disclosable
item—in which case the information to be disclosed is limited to the name of
the kind of item and the total value, and the total weighting or exposure at
the end of the reporting day of all items of that kind.[139]
Stakeholder
comments
Of concern to some stakeholders is that the measure will
impose a significant compliance burden which ‘would predominantly be suffered
in the course of producing voluminous disclosure, most of which would be of
little use, meaningless and immaterial to typical members of superannuation
funds’.[140]
Exemptions
Item 2 of Schedule 6 to the Bill repeals and
replaces subsections 1017BB(4) and (5) to insert the circumstances in
which a trustee or the trustees are fully or partially exempt from reporting.
In addition, the Bill provides that the RSE is not
required to disclose information in respect of up to five per cent of the
assets attributable to each investment option—provided that those investment
items are commercially sensitive and making information publicly available
about those investment items would be detrimental to the interests of the
entity’s members.[141]
Stakeholder
comments
The Financial Services Council (FSC) supports the
inclusion of the five per cent threshold on the grounds that it ‘should be
sufficient for now to protect those assets where disclosure of the fund name or
holdings is not permitted as a result of confidentiality undertakings’ (for
example private equity assets).[142]
The FSC recommended that RSE licensees could seek exemption from ASIC to
provide relief (either Class Order or specific relief) in situations where the five
per cent threshold has been exceeded and the RSE is under an obligation not to
disclose the information.[143]
ASFA expressed its concern that this measure may lead to:
- the under-disclosure/non-disclosure
of assets which are not commercially sensitive; and
- a large number of applications for
relief to ASIC for assets whose value exceeds 5%.[144]
In order to address this potential problem ASFA suggests:
- establishing principles by which
trustees can exempt commercially sensitive information (e.g. directly held real
estate/infrastructure assets, derivatives)
- making disclosure of commercially
sensitive assets non-specific (i.e. not identifying individual assets)
-
identifying the asset but not
disclosing the value
which
would still aid transparency in terms of asset concentration and portfolio
risk.[145]
Schedule 7—annual
members’ meetings
Quick guide to Schedule 7
The provisions of Schedule 7 to the Bill require RSE
licensees to hold annual members’ meetings for the purpose of discussing the
key aspects of the fund and providing members with a forum to ask questions
about the fund’s performance and operations.
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Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 7 will have nil financial impact on the Government.[146]
However, the measure is likely to have a compliance cost
to stakeholders which the Government estimates as ‘low to medium’.[147]
According to the Regulation Impact Statement the measure:
... would involve an overall initial cost of $8.5 million
(mainly related to IT) and ongoing costs of around $13.7 million per year. The
annual compliance cost impact, averaged over 10 years, is estimated at $14.6
million. These costs would be spread across 144 RSE licensees and 221 funds
(around $66,000 p.a. per fund).[148]
This estimate of cost has been refuted by many
stakeholders as discussed below.
Key
provisions
Item 5 of Schedule 7 to the Bill renames existing
Division 5 of Part 2B of the SIS Act and inserts proposed Subdivision
A—Annual members’ meetings. The effect of the amendment is that the
existing provisions of Division 5 will fall within the newly named Subdivision
B of Division 5.
Requirement for annual members meeting
Currently trustees of
APRA-regulated funds are required to provide annual reports and periodic
statements to members.[149] Members are able to request information from trustees to
assist in understanding benefit entitlements.[150] According to the Explanatory Memorandum to the Bill:
By contrast, shareholders of public companies can engage
directly with directors and executives through compulsory annual general
meetings (AGMs). Shareholders also have the capacity to vote on binding
resolutions. The purpose of corporate AGMs is to hold directors to account for
their decisions. Members of registered managed investment schemes do not have
the capacity to vote on ordinary resolutions. However, they do have the
capacity to hold member meetings to vote on special and extraordinary
resolutions, including removal of the responsible entity and winding-up the
scheme.[151]
The Bill provides that the RSE licensee of a registrable
superannuation entity must hold an annual meeting of members of the entity for
each year of income of the entity.[152]
The rationale for the requirement is, amongst other things, that it will
improve engagement between members of APRA-regulated funds and their
superannuation.[153]
High levels of disengagement mean that the capacity of fund
members—the ultimate beneficiaries of superannuation—to request information
from their funds, and to hold trustees accountable for their performance, is
reduced. Industry, left to its own devices, has not developed a uniform
mechanism for enabling members to hold trustees accountable.[154]
Notice of the meeting must be given in writing and include
the time and location of the annual members’ meeting, if the annual members’
meeting is to be held by electronic means—details of how the meeting can be
attended electronically and the agenda of matters to be discussed at the annual
members’ meeting.
The notice must be given no later than six months after
the end of the year of income of the entity and at least 21 days before
the meeting.[155]
Stakeholder
comments
It is this measure which has raised the most concerns
amongst stakeholders. Many raised the issues of the costs and the logistics for
such a meeting.[156]
For instance, REST Industry Super has stated:
... with almost two million members, the sheer logistics and
costs of holding a physical or even electronic meeting are daunting, if not
prohibitive. If this requirement is introduced alternative options for large
funds should be made available. [157]
According to REST the cost of convening a physical meeting
for 300 people would be $2.7 million (including the cost of mailing the notice
of the meeting) which would have to be paid for from the fund. Whilst a webinar
is a less expensive alternative, it is not without issues.[158]
AMP also cited cost as a major issue and opined that the
financial impact is significantly understated in the Explanatory Memorandum
which it considers to be fundamentally flawed for the following reasons:
- Venue hire for physical meetings
and staff costs have been considered but there does not appear to be any costs
included for the online system functionality (to cater for potentially
thousands of questions and answers), event coordination and reporting that will
be required for online annual members meetings. While there is an option to
hold annual members meetings electronically, it does not appear that there has
been any assessment of the complexity and therefore significant cost that will
be involved in organising, running and reporting (including answering questions
and providing minutes) these meetings online for millions of fund members.
- Venue hire cost for flexible annual
members meetings has been estimated at just $6,000 for three hours. The Explanatory
Memorandum estimates likely attendance as being up to 140,000 attendees. While
we do not believe it is possible to determine at this stage how many members
are likely to attend the annual members meetings, we know that it will cost significantly
more than $6,000 to hire a venue large enough to accommodate even these 140,000
members. The AMP Ltd Annual General Meeting (AGM) venue hire cost, for example,
is $500,000, which is substantially more than the $6,000 that has been
estimated in the regulation impact statement.[159]
The practical difficulties of holding a webinar were also
raised by ASFA stating:
... one of our members has advised that they are unaware of a
webinar system that could support more than 3,000 participants which could also
mean the need for additional meetings should the response exceed that threshold.[160]
Other stakeholders questioned the need for such a meeting.
For instance, Mercer strongly disagreed with the premise that many
superannuation members have little or no ability to ask questions about their
fund.
We note that members can and do contact their superannuation
funds via telephone, e-mail and letter; and that there are existing
requirements for funds to respond to member inquiries and complaints.
Given the existing avenues for member inquiries, it is not
clear that the benefits to members of providing annual members meetings will
outweigh the costs, which we expect will be substantial.[161]
Conduct of
the meeting
At the annual members’ meeting, the RSE licensee must give
members of the registrable superannuation entity reasonable opportunities
to ask questions about:
- the
registrable superannuation entity
- if
the RSE licensee is a body corporate—the RSE licensee and the responsible
officers of the RSE licensee
- if
the RSE licensee is a group of individual trustees—each of the individual
trustees
- any
audit of the registrable superannuation entity for the year of income of the
entity
- any
actuarial investigation of the registrable superannuation entity during the
year of income of the entity and
- any
information included with the notice of the meeting.[162]
Stakeholder
comments
The Australian Institute of Company Directors expressed
some disquiet that the model for the annual members’ meeting in the Bill is
unnecessarily prescriptive in contrast to the conduct of company AGMs.
It would be more appropriate for answers to be provided
formally by the RSE licensee through the chair of the meeting. This more
closely reflects the fact that many of the decisions taken by RSE licensees are
not taken by individuals but by combinations of individuals (such as the board,
management teams) and are the result of multistep processes. It would not, for
instance, be appropriate to require an individual board member to disclose how
they personally voted on a board resolution.[163]
And further:
Under the Corporations Act, the chair of an AGM must allow a
reasonable opportunity for the members as a whole at the meeting to ask
questions about, or make comments on, the management of the company. This means
that not all questions must be answered. In practice, the chair acts as a
mediator. The chair is responsible for the general conduct of the AGM and
determines who can speak, in which order, and for how long. It is also usual
for members to be encouraged to send in questions ahead of the AGM. This
enables the chair to deal with frequently asked questions before opening
questions from the floor.[164]
The Law Council of Australia also highlighted the
differences between the annual members’ meeting as proposed and an AGM. ‘In
contrast to an annual general meeting of shareholders in a company where
business is transacted and resolutions are voted upon, an annual meeting of
members would effectively be a mandatory attempt to engage with members on an
annual basis.’[165]
Obligation
to attend
In order to facilitate the Annual Members’ Meeting
process, the Bill requires that where the RSE licensee of a registrable
superannuation entity is a body corporate and appropriate notice has been given,
the following persons are to attend the annual members’ meeting:
- the
Chair of the board of directors of the RSE licensee, a director of the RSE
licensee[166]
and an executive officer of the RSE licensee[167]
- a
person who has been an auditor of a RSE for a year of income of the entity[168]
and
- a
person who has been an actuary of a RSE for a year of income of the entity.[169]
In each case, a failure to attend gives rise to a maximum
penalty of 50 penalty units[170]
unless the person has a reasonable excuse for not attending.[171]
If, at the annual members’ meeting any of the above
persons is asked a question by a member of the registrable superannuation
entity, the person must answer the question at the meeting or, if it is
not reasonably practicable to do so, within one month after the meeting. A
failure to comply with this requirement gives rise to a maximum penalty of 50
penalty units.[172]
However the penalty does not apply where:
- the
question is not relevant to an action, or failure to act, by the RSE licensee
in relation to the registrable superannuation entity or one or more members of
the registrable superannuation entity or the registrable superannuation entity
itself[173]
- it
would be in breach of the governing rules of the registrable superannuation
entity, the SIS Act or any other law to answer the question[174]
- answering
the question would result in detriment to the members of the registrable
superannuation entity, taken as a whole[175]
or
- in
any other circumstances prescribed by the regulations.[176]
Stakeholder
comment
The Law Council of Australia suggested that the grounds on
which a trustee can decline to answer a question should be expanded.
... for example, where there is insufficient time, where
questions are repetitive, vexatious, offensive or designed to ridicule or
concern confidential or privileged matters (rather than relying on the
exemption for questions which pose a detriment to members), or relate to
persons other than the member asking the question.[177]
Scrutiny of
Bills Committee
The Scrutiny of Bills Committee expressed its concern that
the circumstances in which the above-mentioned offences will not apply are
framed as exceptions, which impose an evidential burden on the defendant to
raise evidence about the matter, rather than elements of the offence that the
prosecution will be required to prove.
The Committee has requested the Minister’s advice as to
the appropriateness of amending the Bill ‘to provide that the exceptions to the
offences be included as elements of the offence, rather than as exceptions’.[178]
In addition the Scrutiny of Bills Committee has sought the Minister’s advice
‘as to why it is proposed to allow the regulations to prescribe other
exceptions to the offence relating to the obligation to answer questions.[179]
Key issues
If the objective of this measure is to mirror the provisions
of the Corporations Act in respect of the annual general meeting held by
corporations the amendments do not achieve that objective.
First, the AGM ‘plays an important role in the
corporate context specifically because it is a deliberative forum; it makes
decisions on key governance matters such as the appointment of directors and
the auditor, adoption of financial accounts and, in listed companies, the
approval of executive remuneration’.[180]
The annual members’ meeting required by the Bill has no such role.
Second, the Bill requires that the Chair, CEO and
at least a quorum of directors attend the annual members’ meeting and answer
questions put to them at the meeting. No equivalent requirement is contained in
the Corporations Act for other company directors.
Third, it unclear why it is an offence if a
superannuation director does not attend or answer questions. No equivalent
requirement is contained in the Corporations Act for other company
directors.[181]
The Explanatory Memorandum is silent as to why this approach has been adopted.
It is worth noting that in the initial stages of its
inquiry into the superannuation system, the Cooper Review canvassed the idea of
trustees holding an annual general meeting for members of large APRA funds so
that members would have a forum to exercise powers in the same way that
shareholders can exercise powers with respect to directors at an AGM. However,
the final report of the Cooper Review states:
While the panel was initially somewhat attracted to this
concept, it has been convinced by the overwhelming weight of submissions that
the structural and logistical issues inherent in the superannuation industry
make it impractical and undesirable at this time to require superannuation
funds to hold AGMs.[182]
Schedule 8—reporting
standards
Quick guide to Schedule 8
The amendments in Schedule 8 to the Bill provide APRA with
the authority to obtain information on expenses incurred by RSE and RSE
licensees in managing or operating the RSE.
|
Financial
implications
According to the Explanatory Memorandum to the Bill the
measures in Schedule 8 will have nil financial impact.[183]
Key
provisions
Item 3 of Schedule 8 to the Bill amends the Financial
Security (Collection of Data) Act the purpose of which is, amongst other
things, to enable APRA to collect information to assist in performing its
functions or exercising its powers under other laws, such as the SIS Act.[184]
Currently section 13 of the Financial Security
(Collection of Data) Act empowers APRA to determine reporting standards
that are required to be complied with.
Item 3 inserts proposed subsection 13(4D) so
that a reporting standard may require an RSE licensee to provide information in
relation to any money, consideration or other benefit given to another
entity by the RSE licensee out of the assets of a registrable
superannuation entity of the RSE licensee, including information about:
- details
of the entity to which the money, consideration or other benefit is given
- the
purpose for which the money, consideration or other benefit is given
- the
way in which the money, consideration or other benefit is used by the entity to
which it is given, and any entity with which that entity deals.
Where a reporting standard requires an RSE licensee to
provide such information and the money, consideration or other benefit is given
under a contract or other arrangement between the RSE licensee and the other
entity (called the second party) the contract or arrangement is
taken to include:
- a
term requiring the RSE licensee to notify the second party that the money,
consideration or benefit is given out of the assets of a registrable
superannuation entity. The notification is to be made at the time the money,
consideration or benefit is given or as soon as reasonably practicable after
that time[185]
and
- a
term requiring the second party, if notified by the RSE licensee, to provide
the RSE licensee with the required information of which the second party is
aware, as soon as reasonably practicable after being notified.[186]
According to the Explanatory Memorandum to the Bill:
This additional information will enable APRA to understand
the full picture of how RSEs are using member contributions and will enable
APRA to consider whether expenses of individual RSEs are in line with the RSE
licensee's obligations under the SIS Act, including the obligation to
act in the best interests of beneficiaries.[187]
Key issues
Of concern is that the term another entity is not
defined. The effect of the amendment is that it would ‘capture an extremely
broad range of transactions, and require disclosure of information which at
present may be consider commercially confidential’.[188]
According to CSA, the proposed form of reporting ‘will
increase the compliance burden and the amount of data for APRA scrutiny’. CSA
would prefer to see the ‘focus of reporting on related party payments and
reduced compliance required for routine small payments to non-related parties’.[189]
Concluding comments
The Bill contains a number of measures which are highly
contentious.
The requirement to hold an annual members’ meeting has
raised significant concerns as to the cost and logistical difficulties that RSE
licensees face. In addition, the imposition of civil and criminal penalties for
non-attendance by board members, auditors and actuaries have no equivalent in
the Corporations Act.
Further, the increased powers of APRA to issue directions—purportedly
where there are prudential concerns—are significant.
[1]. Review
into the Governance, Efficiency, Structure and Operation of Australia’s
Superannuation System, Super
system review, final report, (Cooper Review), [Review into the
Governance, Efficiency, Structure and Operation of Australia’s Superannuation
System, Canberra, 2010]. The Cooper Review was chaired by former deputy
commissioner of ASIC Jeremy Cooper and was conducted over the period 2009–2010.
The Cooper Review covered a broad range of issues including the performance and
governance of the superannuation industry and has formed the basis for a number
of recent legislative changes under the Government’s ‘Stronger
Super’ package of measures.
[2]. Australian
Government, ‘MySuper’,
Treasury website.
[3]. The
‘scale test’ requires trustees of a superannuation fund that includes a MySuper
product to determine on an annual basis whether the beneficiaries of the fund
who hold the MySuper product are disadvantaged, in comparison to the beneficiaries
of other funds who hold a MySuper product within those other funds, based on
the number of members or assets in the MySuper product or fund. This
requirement was inserted into the SIS Act by the Superannuation
Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012.
[4]. K
Swoboda, Superannuation
Laws Amendment (MySuper Capital Gains Tax Relief and Other Measures) Bill 2013,
Bills digest, 158, 2012–13, Parliamentary Library, Canberra, 2013, pp. 6–7.
[5]. Australian
Prudential Regulation Authority (APRA), ‘Register of RSE Licensees
and RSEs: list of MySuper authorisations’, APRA website.
[6]. Australian
Government, Stronger
super: Government response to the review into the governance, efficiency,
structure and operation of Australia’s superannuation system, Canberra,
16 December 2010, pp. 5–8.
[7]. Australian
Government, Stronger super:
information pack, 21 September 2011, p. 3.
[8]. K
O’Dwyer (Minister for Revenue and Financial Services), Reforms
to give consumers more power at the heart of a stronger superannuation system,
media release, 24 July 2017.
[9]. T
Abbott (Prime Minister) and J Hockey (Treasurer), Financial
system inquiry, joint media release, 20 November 2013.
[10]. Financial
System Inquiry, Financial System
Inquiry: final report, (Murray Review), Treasury, November 2014,
p. 89.
[11]. S
Morrison (Treasurer) and K O’Dwyer (Minister for Revenue and Financial
Services), Productivity
Commission review into the efficiency and competitiveness of the superannuation
system, joint media release, 17 February 2016.
[12]. Productivity
Commission (PC), ‘Superannuation’,
PC website.
[13]. Dixon
Advisory, Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 28 September 2017, p. 1.
[14]. This
Bill is the subject of a separate Bills Digest. See: P Pyburne, Superannuation
Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, Bills
digest, 40, 2017–18, Parliamentary Library, Canberra, 2017.
[15]. Details
of the terms of reference, submissions to the Economics Committee and the
Committee’s final report are available on the inquiry
homepage.
[16]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017 [and] Superannuation Laws Amendment
(Strengthening Trustee Arrangements) Bill 2017, The Senate, Canberra,
23 October 2017, p. 29.
[17]. Ibid.,
p. 47.
[18]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2017, The Senate, Canberra, 18 October 2017, pp. 57–61.
[19]. Australian
Labor Party, Dissenting
report, Senate Economics Committee, Inquiry into the provisions of the
Treasury Laws Amendment (improving Accountability and Member Outcomes in
Superannuation Measures No. 1) Bill 2017, The Senate, Canberra, 2017, pp.
41–47.
[20]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017 [and] Superannuation Laws Amendment
(Strengthening Trustee Arrangements) Bill 2017, op. cit.
[21]. The
Statement of Compatibility with Human Rights can be found at pages 22, 28,
35–38, 54, 75, 87, 98 and 118 of the Explanatory
Memorandum to the Bill.
[22]. Parliamentary
Joint Committee on Human Rights, Report,
11, 2017, 17 October 2017, p. 60.
[23]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 3.
[24]. SIS
Act, subsection 29R(1).
[25]. SIS
Act, paragraph 29VN(b).
[26]. SIS
Act, proposed subsection 29VN(4) contains the relevant regulation
making power.
[27]. SIS
Act, proposed subsection 29VN(3).
[28]. SIS
Act, proposed subsection 29VN(5).
[29]. Law
Council of Australia (LCA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 9 October 2017, p. 5.
[30]. Association
of Superannuation Funds of Australia (ASFA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 1.
[31]. Australian
Securities and Investments Commission (ASIC), ‘MySuper
product dashboard requirements for superannuation trustees’, ASIC website,
last updated 18 January 2017.
[32]. ASFA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 3.
[33]. Corporate
Superannuation Association (CSA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 25 September 2017, p. 2.
[34]. Mercer,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 1.
[35]. Choice,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, September 2017, p. 6.
[36]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017 [and] Superannuation Laws Amendment
(Strengthening Trustee Arrangements) Bill 2017, The Senate, Canberra,
23 October 2017, p. 9.
[37]. S McCracken, J Bird,
J Stumbles and G Tolhurst, Banking and financial institutions law, 8th
edn, Lawbook Co., Sydney, 2013, p. 19.
[38]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 3.
[39]. SIS
Act, paragraphs 29T(1)(h) and (ha).
[40]. SIS
Act, paragraph 29T(1)(i).
[41]. SIS
Act, paragraph 29T(1)(j). Those sections are 29W (offering a product as a
MySuper product when not authorised to do so), 29WA (contributions in relation
to which no election is made are to be paid into a MySuper product) and 29WB
(contributions by a large employer in relation to which no election is made are
to be paid into a large employer MySuper product).
[42]. SIS
Act, proposed paragraph 29T(1)(h).
[43]. SIS
Act, proposed paragraph 29T(1)(i).
[44]. SIS
Act, proposed paragraph 29T(1)(j).
[45]. SIS
Act, proposed paragraph 29T(1)(k).
[46]. SIS
Act, proposed paragraph 29U(2)(c).
[47]. SIS
Act, proposed paragraph 29U(2)(ca).
[48]. SIS
Act, proposed paragraph 29U(2)(d).
[49]. SIS
Act, proposed paragraph 29U(2)(e).
[50]. WA
Pines Pty Ltd v Bannerman (1980) 41 FLR 175, [1980]
FCA 79, (27 June 1980).
[51]. Ibid.
[52]. Financial
System Inquiry, Financial System Inquiry:
final report, (Murray Review), op. cit., p. 135.
[53]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 4.
[54]. SIS
Act, subsection 29VPA(1).
[55]. SIS
Act, subsection 29VPA(3).
[56]. SIS
Act, proposed subsection 29VPA(2).
[57]. SIS
Act, subsection 52(1).
[58]. SIS
Act, paragraph 52A(2)(a).
[59]. SIS
Act, paragraph 52A(2)(b).
[60]. SIS
Act, paragraph 52A(2)(c).
[61]. SIS
Act, paragraph 52A(2)(d).
[62]. SIS
Act, subsection 52(3). The relevant statutes are Part 2D.1 of the Corporations Act
2001 and Subdivision A of Division 3 of Part 2-2 of the Public Governance,
Performance and Accountability Act 2013.
[63]. SIS
Act, proposed subsection 55AA(1).
[64]. SIS
Act, proposed subsection 55AA(2).
[65]. Financial
System Inquiry, Financial
System Inquiry: final report, (Murray Review), op. cit., recommendation
13, p. 133.
[66]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 7.
[67]. Corporations
Act, subsection 601FC(5) provides that a breach of the duties of a
responsible entity is a civil penalty provision under section 1317E.
[68]. Corporations
Act, subsection 1317G(1).
[69]. Corporations
Act, section 1317H.
[70]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 4.
[71]. SIS
Act, proposed section 29H.
[72]. Item
1 of Schedule 4 to the Bill inserts the definition of controlling
stake into subsection 10(1) of the SIS Act.
[73]. Parliamentary
Joint Committee on Corporations and Financial Services, Inquiry
into the collapse of Trio Capital, May 2012, p. xix.
[74]. SIS
Act, proposed section 29HA.
[75]. SIS
Act, proposed subsections 29HC(1) and (2).
[76]. SIS
Act, proposed subsection 29HC(4).
[77]. SIS
Act, proposed section 29HD.
[78]. SIS
Act, proposed section 29HE.
[79]. SIS
Act, proposed section 29HF.
[80]. The
imposition of strict liability means that a fault element does not need to be
satisfied, but the offence will not criminalise honest errors and a person
cannot be held liable if he, or she, had an honest and reasonable belief that
they were complying with relevant obligations.
[81]. Under
section 4AA of the Crimes
Act 1914, a penalty unit is equivalent to $210. This means that the
maximum daily penalty is $84,000.
[82]. Item
15 of Schedule 4 to the Bill.
[83]. Attorney-General’s
Department (AGD), A guide to
framing Commonwealth offences, infringement notices and enforcement powers,[AGD
Canberra], September 2011, p. 23.
[84]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2017, op. cit., p. 59.
[85]. SIS
Act, proposed subsection 131EB(1). The trustee obligations are
contained in a covenant set out in sections 52–53, or prescribed under
section 54A, or referred to in section 29VN or 29VO.
[86]. The
reference to being accustomed to acting in accordance with the person’s
instructions or wishes reflects the definitions of ‘de facto’ and ‘shadow’
directors inferred from section 9 of the Corporations Act by the courts,
including of body corporates that are associates of the entity in question: Deputy
Commissioner of Taxation v Leslie Raymond Austin [1998]
FCA 1034; Corporate Affairs Commission v Drysdale [1978] HCA 52; (1978) 141 CLR 236; Ho v
Akai Pty Limited (in liquidation) [2006]
FCAFC 159; Buzzle Operations Pty Ltd (In Liq) v Apple Computer Australia
Pty Ltd [2010] NSWSC 233 (provides a summary of the
definition of ‘shadow directors’); Chameleon Mining NL v Murchison
Metals Limited [2010] FCA 1129 (provide a summary of definition of
de-facto director).
[87]. SIS
Act, proposed section 131EC.
[88]. SIS
Act, proposed subsection 131EB(2). The relevant approval is granted
under section 29HD of the SIS Act.
[89]. SIS
Act, proposed subsection 131EB(3).
[90]. SIS
Act, proposed subsections 131EB(5) and (6).
[91]. SIS
Act, proposed subsections 131EB(7) and (8).
[92]. SIS
Act, proposed subsections 131ED(1) and (2).
[93]. This
means that the maximum daily penalty is $84,000.
[94]. Item
3 of Schedule 4 to the Bill inserts proposed paragraph 10(1)(taac) into
the SIS Act so that the decision by APRA to direct a person to
relinquish control of an RSE licensee is reviewable by the AAT.
[95]. Administrative
Appeals Tribunal Act 1975, subsection 41(2).
[96]. SIS
Act, proposed subsection 131EE(2).
[97]. SIS
Act, proposed subsection 131EE(3) and (4).
[98]. SIS
Act, proposed subsection 131EF(4).
[99]. SIS
Act, proposed subsection 131EF(3).
[100]. SIS
Act, proposed paragraph 133(1)(f).
[101]. SIS
Act, proposed paragraph 133(1)(g).
[102]. Financial Sector
(Shareholdings) Act, section 8.
[103]. FATA,
section 39.
[104]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 55.
[105]. Ibid.,
p. 5.
[106]. Note
that Divisions 1 and 3 of proposed Part 16A are inserted into the SIS
Act by Schedule 5 to the Bill whilst Division 2 of proposed Part 16A
is inserted into the SIS Act by Schedule 4 to the Bill.
[107]. SIS
Act, proposed subsection 131D(2).
[108]. SIS
Act, proposed subsection 131D(5).
[109]. Australian
Institute of Company Directors, Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 5.
[110]. S
Donald (Centre for the Law, Markets and Regulation, University of New South
Wales), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 4.
[111]. Ibid.,
p. 5.
[112]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 8.
[113]. SIS
Act, proposed subsection 131D(1).
[114]. Donald
(Centre for the Law, Markets and Regulation, University of New South Wales), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 4.
[115]. Industry
Super Australia, Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 28 September 2017, p. 11.
[116]. Ibid.,
p. 14.
[117]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 55.
[118]. SIS
Act, proposed section 131DA.
[119]. SIS
Act, proposed subsection 131DB(1).
[120]. SIS
Act, proposed subsections 131DB(3) and (4).
[121]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 69.
[122]. SIS
Act, proposed subsection 131DB(2).
[123]. SIS
Act, proposed subsection 131DC(1).
[124]. SIS
Act, proposed subsection 131DC(3).
[125]. SIS
Act, proposed subsection 131DD(1).
[126]. However,
where a body corporate is convicted of an offence against proposed
subsection 131DD(1) of the SIS Act, subsection 4B(3) of the Crimes Act 1914
allows a court to impose a fine of up to five times the penalty stated.
[127]. SIS
Act, proposed subsection 131DD(2). The term officer of
a corporation is defined in section 9 of the Corporations Act
2001 as: (a) a director or secretary of the corporation; (b) a person
who makes, or participates in making, decisions that affect the whole, or a
substantial part, of the business of the corporation, or who has the capacity
to affect significantly the corporation’s financial standing, or in accordance
with whose instructions or wishes the directors of the corporation are
accustomed to act (excluding advice given by the person in the proper
performance of functions attaching to the person’s professional capacity or
their business relationship with the directors or the corporation); (c) a
receiver, or receiver and manager, of the property of the corporation; (d) an
administrator of the corporation; (e) an administrator of a deed of company
arrangement executed by the corporation; (f) a liquidator of the corporation;
or (g) a trustee or other person administering a compromise or arrangement made
between the corporation and someone else. Proposed subsection 131DD(7)
applies the Corporations Act definition of officer to section 131DD.
[128]. SIS
Act, proposed subsection 131DD(3).
[129]. SIS
Act, proposed subsection 131DD(4).
[130]. SIS
Act, proposed subsection 131DD(5).
[131]. AGD,
A guide to framing Commonwealth
offences, infringement notices and enforcement powers, op. cit.,
p. 23.
[132]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2017, op. cit., p. 59.
[133]. SIS
Act, proposed subsection 131FB(1).
[134]. SIS
Act, proposed section 131FC.
[135]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 5.
[136]. Item
3 of Schedule 6 to the Bill amends subsection 1017BB(6) of the Corporations
Act by inserting the definition of investment item being an
asset or a derivative; and by inserting the definition of investment
option being a choice product that does not contain multiple investment
options and a MySuper product (within the meaning of the SIS Act).
[137]. Corporations
Act, subsection 1017BB(6) defines the term reporting day as
30 June and 31 December each year.
[138]. Corporations
Act, proposed subsection 1017BB(1).
[139]. Corporations
Act, proposed subsection 1017BB(1A).
[140]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 9.
[141]. Corporations
Act, proposed subsection 1017BB(5A).
[142]. Financial
Services Council, Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 13.
[143]. Ibid.
[144]. ASFA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 6.
[145]. Ibid.
[146]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 6.
[147]. Ibid.
[148]. Ibid.,
p. 104.
[149]. Corporations
Act, Division 3 of Part 7.9.
[150]. Corporations
Act, section 1017C.
[151]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 99.
[152]. SIS
Act, proposed subsection 29P(1).
[153]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 100.
[154]. Ibid.,
p. 102.
[155]. SIS
Act, proposed paragraph 29P(3)(d).
[156]. Choice,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 7.
[157]. REST
Industry Super, Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 5 October 2017, p. 2.
[158]. Ibid.
[159]. AMP,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, 29 September 2017, p. 2.
[160]. AFSA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 4.
[161]. Mercer,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 15.
[162]. SIS
Act, proposed subsection 29P(5).
[163]. AICD,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 3.
[164]. Ibid.
[165]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 10.
[166]. SIS
Act, proposed subsection 29PA(6) provides that the number of
directors to attend the annual general meeting is to be no less than the number
of directors that would constitute a quorum for a meeting of the board of
directors.
[167]. SIS
Act, proposed subsection 29PA(1).
[168]. SIS
Act, proposed subsection 29PA(3).
[169]. SIS
Act, proposed subsection 29PA(4).
[170]. This
means the maximum penalty is equivalent to $10,500.
[171]. SIS
Act, proposed subsection 29PA(5).
[172]. SIS
Act, proposed subsection 29PB(2) (responsible officer); proposed subsection
29PC(2) (individual trustee); proposed subsection 29PD(2) (auditor);
proposed subsection 29PE(2) (actuary) .
[173]. SIS
Act, proposed paragraph 29PB(3)(a) (responsible officer); proposed
paragraph 29PC(3)(a) (individual trustee); proposed paragraph 29PD(3)(a)
(auditor); proposed subsection 29PE(3)(a) (actuary).
[174]. SIS
Act, proposed paragraph 29PB(3)(b) (responsible officer); proposed
paragraph 29PC(3)(b) (individual trustee); proposed paragraph 29PD(3)(b)
(auditor); proposed subsection 29PE(3)(b) (actuary).
[175]. SIS
Act, proposed paragraph 29PB(3)(c) (responsible officer); proposed
paragraph 29PC(3)(c) (individual trustee); proposed paragraph 29PD(3)(c)
(auditor); proposed subsection 29PE(3)(c) (actuary).
[176]. SIS
Act, proposed paragraph 29PB(3)(d) (responsible officer); proposed
paragraph 29PC(3)(d) (individual trustee); proposed paragraph 29PD(3)(d)
(auditor); proposed subsection 29PE(3)(d) (actuary).
[177]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 11.
[178]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2017, op. cit., p. 60.
[179]. Ibid.,
p. 61.
[180]. Donald
(Centre for the Law, Markets and Regulation, University of New South Wales), Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 6.
[181]. ISA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., pp. 21–22.
[182]. Cooper
Review, Chapter 2, p. 58.
[183]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 7.
[184]. Financial
Security (Collection of Data) Act, section 3.
[185]. Financial
Security (Collection of Data) Act, proposed paragraph 13(4E)(c).
[186]. Financial
Security (Collection of Data) Act, proposed paragraph 13(4E)(d).
[187]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 1) Bill 2017, p. 113.
[188]. LCA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 11.
[189]. CSA,
Submission
to the Senate Economics Legislation Committee, Inquiry into the Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 1) Bill 2017, op. cit., p. 3.
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