Superannuation Alert 6. 11. 2014

Financial Services eBulletin - 6 November 2014

The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.

  • On 22 October 2014, the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Amendment Act 2014 No. 112 (Cth) commenced. This act amends the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy (Collection) Act 2011 No. 55 (Cth). The Explanatory Memorandum provides that the new "industry contribution", which replaces the current "Supervisory Cost Recovery Levy", will provide funds for both the regulatory and financial intelligence unit functions of AUSTRAC.

  • On 30 October 2014, the Federal Circuit Court of Australia handed down judgment in Queensland Local Government Superannuation Board v Superannuation Complaints Tribunal & Anor [2014] FCCA 2473. On 1 July 2011, the Brisbane City Council superannuation plan (City Super) merged with the Local Government Superannuation Scheme (LG Super). The appellant, Queensland Local Government Superannuation Board was to be the continuing trustee of the merged funds which would continue to be known as LG Super. The agreement between the outgoing and incoming trustees provided that on transfer, all former members of City Super would have no lesser entitlements as members of LG Super than they had as members of their previous scheme, City Super. A transitional feature involved an agreement reached between the two funds on a mechanism for the distribution of surplus on a final accounting to City Super members. The appellant decided to apply the surplus funds by making a further distribution to the accounts of members who had been members of City Super as at 30 June 2011 and who continued to be members of the merged fund at that date, namely 2 February 2012. No distribution was made to the second respondent, Ms Davies, as she had exited the merged fund on 13 January 2012. The Superannuation Complaints Tribunal determined that it was not satisfied that the decision of the trustee to exclude the complainant from the distribution of 2 February 2012 was fair and reasonable and made a finding in Ms Davies’ favour. On appeal to the Federal Circuit Court of Australia, Burnett J found that: 
    • the new trustee's decision to follow the methodology set out by the former trustee did not constitute a fetter on the Trustee's decision;
    • the new trustee was obliged to deal with the surplus funds consistently with the trust's obligations and it did so; and
    • the SCT's failure to put the new trustee on notice that it would make a finding in respect of a contravention of section 1017B of the Corporations Act 2001 (Cth), constituted a clear denial of procedural fairness.
  • On 30 October 2014, Australian Prudential Regulatory Authority (APRA) released Prudential Practice Guide LPG 270 - Group Insurance Arrangements which outlines prudent practices in relation to group insurance arrangements. The main areas of focus are life insurance, total and permanent disability insurance and income protection insurance provided to a registrable superannuation entity (RSE) licensee, for offering to beneficiaries. Topics covered in LPG 270 include the identification of risks in accordance with an insurer's risk management framework, responding to tenders, data management, outsourcing of claims decisions and changes in an insurer's claims philosophy.

  • On 30 October 2014, Australian Securities & Investments Commission (ASIC) made available a media release stating that on 29 October 2014 ASIC's Annual Report 2013-2014 was tabled in Parliament.

  • On 31 October 2014, the Administrative Appeals Tribunal of Australia in Liu and Australian Securities and Investments Commission [2014] AATA 817 affirmed a permanent banning order imposed by ASIC on a financial adviser involved in the collapse of Trio Capital. On 7 February 2013, ASIC made a decision to permanently ban Mr Liu (Chief Investment Strategist for Astarra Capital Limited) from providing financial services. The delegate found Mr Liu had engaged in dishonest conduct in the course of carrying on a financial services business. The decision followed investigations conducted by ASIC into the collapse of Trio Capital Ltd (formerly known as Astarra Capital Ltd), which was the responsible entity for two fraudulently managed investment schemes. The Tribunal considered that a permanent banning order was appropriate in the circumstances in this case. The Tribunal said: "this was one of the largest and most serious collapses of a managed investment scheme. Retail investors lost retirement savings and Mr Liu was involved in promoting and managing investments in ASF. General deterrence is an important consideration in this case. It is also important for the public to have confidence in the regulation of the financial services industry and for the regulator to send a message to other financial service providers about the significance of compliance with the financial services laws.

  • On 31 October 2014, APRA released its 2014 Annual Report (Report). In the address from the APRA Chairman, Wayne Byres stated that "in 2013/14, APRA’s supervisory priority in the superannuation industry was the implementation of the new prudential framework that came into force in July 2014…APRA’s objective was to ensure that enhanced policies and processes required under the new prudential standards were truly embedded in trustees’ practices. Specific areas of focus are governance (including conflicts of interest), risk management/risk appetite/risk culture, investments (especially liquidity management and stress testing), insurance and data integrity". Mr Byres also noted that "superannuation funds experienced sound growth supported by good investment performance due to continuing strength in global and domestic equity markets." The Report notes that APRA’s broad objective in the current circumstances is to "ensure that regulated institutions are resilient and prepared to respond to challenges that may arise in the future… In part, this means ensuring the financial resilience built up in recent years is maintained. It also requires the ongoing enhancement of technology systems and risk management capabilities".

Further information

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