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The government has released a consultation paper on the enforceability of financial services industry codes, including the Insurance in Super Voluntary Code of Practice.
The consultation paper relates to the recommendation of the financial services royal commission that some provisions of codes in the financial sector should be ‘enforceable code provisions’. The government agreed to this recommendation to give ASIC additional powers to approve and enforce code provisions.
AIST is a code-owner of the Insurance Code and most AIST member funds have subscribed to the Code. AIST will be responding to the consultation paper and is also discussing our response with the other code-owners.
The consultation paper asks 14 questions to assist the development of legislation to enact the government’s commitment to implement the commission's recommendation. These questions go to the benefit of codes; what rules must be met (including what clauses are enforceable); monitoring and reviews of codes; and what regulatory powers, remedies and penalties should apply.
You are invited to contact AIST Senior Policy Manager David Haynes at firstname.lastname@example.org if you have any questions about this consultation or would like to have input into our submission. Submissions to Treasury are due by 12 April.
Two superannuation regulatory bodies have highlighted the need to improve their use of data to identify underperforming funds and enhance member transparency.
Speaking at the regulator’s session at last week’s Conference of Major Super Funds on the Gold Coast, James O’Halloran, Deputy Commissioner Superannuation Australian Taxation Office (ATO), and Helen Rowell, Deputy Chair, Australian Prudential Regulation Authority (APRA) both highlighted plans to improve data quality and use across their services.
In a wide ranging speech that touched on unpaid super, the ATO’s priorities for 2019 and the ATO’s enforcement tools, Mr O’Halloran said fund members increasingly sought access to more timely information to enable them to take an active role in their financial future.
“We’ve considered how we can improve the level of insight into the super system. Our view is that increased transparency and timely reporting of transactional data is in the interests of fund members and the super system,” he said.
Mr O’Halloran said the ATO sought a balance between improving compliance levels, while also promoting a positive client experience.
“It’s important for taxpayers to have access to the best information available about their personal circumstances,” Mr O’Halloran said.
APRA’s Helen Rowell also used her speech to discuss the need for better data to empower consumer engagement with superannuation.
“Our challenge is to collect and present superannuation data in a way that can be understood by a broad audience and yet also allows for meaningful comparisons between funds and products,” she said.
Ms Rowell noted that the ‘Choice’ sector had the largest gaps in data and said APRA was committed to undertaking a major review of data reporting to upgrade transparency.
This is something AIST has long-called for, given the very high level of underperformance across the Choice sector, notably in retail funds.
Ms Rowell said increased data capabilities would mean more scrutiny on fund performance, with the trustees of underperforming funds coming under “intensified supervision”.
“If trustees are unable or unwilling to respond appropriately, we will be urging them to seriously consider whether restructuring or exiting the industry is in their members’ best interests,” she said.
The Government has released a consultation paper in response to the financial services royal commission recommendation to remove the exclusion of insurance claims handling from the definition of ‘financial service’.
The consultation paper notes that including the handling and settlement of insurance claims in the definition of ‘financial service’ will allow ASIC to enforce a higher standard of behaviour and ensure the consumers expect the same standard from insurers handling claims as they can from other financial service providers.
AIST has supported this recommendation providing concerns with the removal of the exemption leading to several unintended consequences are addressed. For example, claims handling staff may be deemed as providing personal financial advice.
You are invited to contact AIST Senior Policy Manager David Haynes at email@example.com if you have any questions about this consultation or would like to have input into a submission. Submissions to Treasury are due by 29 March.
Treasury’s consultation in relation to draft legislation on the banning of grandfathered conflicted remuneration on investment products paid to financial advisers closes this Friday, 22 March.
The consultation comes in the wake of the government’s announcement they will implement the royal commission recommendation to end such payments.
AIST supports the exposure draft legislation which will see the end of grandfathered conflicted remuneration on financial products. However, we believe that the 2021 implementation date is too long a timeframe, and this measure must be implemented as soon as possible.
AIST will be making a submission and will recommend that commissions be immediately added to fee disclosure statements, and in the absence of compelling reasons for their continued exemption, risk insurance products must be included in this measure.
For more information in relation to this consultation, please contact Richard Webb, Policy & Regulatory Analyst at firstname.lastname@example.org
The Australian Prudential Regulation Authority (APRA) has announced it will be increasing scrutiny of superannuation trustees to ensure they are giving enough consideration to the risks of climate change to their business.
The announcement comes from the release of APRA’s first climate risk survey report, in which 38 large banks, insurers and superannuation trustees were surveyed to assess their views and practices related to climate-related financial risks.
While the majority of APRA-regulated entities were found to be taking steps to increase their understanding of climate change risks, APRA has stated it wants to see entities move from awareness of the financial risks to taking meaningful action to mitigate against them.
APRA executive board member, Geoff Summerhayes, stated that APRA’s views on the economic risks of climate change are consistent with those of financial regulators internationally.
“These risks are material, foreseeable and actionable now. Uncertainty over long-term impacts or policy direction is not an excuse for doing nothing,” said Mr Summerhayes.
The Australian Financial Complaints Authority (AFCA) has established a Consumer Advisory Panel to guide its major initiatives and advocacy actions.
The newly-formed financial complaints body has assembled the Panel to provide important insights on issues and ensure consumer needs were being met.
AFCA CEO David Locke said that AFCA could only deliver on providing service to customers if it understood the different needs among AFCA customers.
“Consumer organisations see thousands of people every year and have unique perspectives that can help inform AFCA’s work.
“We have ensured that we have selected Panel members who represent the community we serve, including older Australians, Indigenous and Torres Strait Islanders, vulnerable communities and those with financial difficulties,” Mr Locke said.
The Panel consists of 10 leading consumer representatives and is chaired by Peter Gartlan, who was previously the Executive Officer for the Financial and Consumer Rights Council and on the board of the Consumer Action Law Centre.
AFCA Consumer Advisory Panel members are as follows:
Last week’s AIST’s Conference of Major Super Funds saw both AIST’s CEO Eva Scheerlinck and Australian Super’s CEO Ian Silk warn the profit-to-member sector against complacency following the release of the Hayne royal commission findings.
Delivering the Conference keynote address, Mr Silk noted that while industry funds had emerged largely uncriticised from the royal commission process and in better shape than the retail sector this was “no cause for triumphalism”.
Mr Silk warned that the retail sector could regroup and that new models of super funds could emerge in what was likely to be a more challenging investment environment over the next decade.
Drilling down on five threshold issues facing profit-to-member funds, Mr Silk urged funds with declining membership or performance consistently below the median to consider whether their members were best served by the status quo continuing.
“Our test is not whether we’ve produced good results; it’s certainly not whether we’ve done better than other sectors. Our test must be, have we done as well for members as we could have?” he said.
In her opening address, Ms Scheerlinck said while the profit-to-member sector had emerged largely unscathed from the royal commission there were plenty of lessons for everyone in Commissioner’s Hayne’s final report.
“As our sector grows, and as individual funds grow and become major financial institutions, we need to ensure that we have the discipline and internal risk management practices and controls in place, to ensure that we never lose sight of our mission – to deliver better retirement futures for our members. And for that, we don’t need more laws, more regulation. We just need to remain true to our purpose and do what is right.”
21 March 2019