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The Morrison Government has this week released a roadmap to implement the Hayne Royal Commission recommendations.
The roadmap provides timelines for implementing the 54 Commission recommendations (out of a total of 76 recommendations) directed to the Government. More than 40 of these recommendations require legislation. In addition, 18 further commitments were made by the Government based on comments and observations in the Royal Commission’s final report.
While AIST welcomed the release of the timeframe, the Government’s response to date has been slow, with only a handful of recommendations having been subject to the legislative process.
We have called on the Government to prioritise key recommendations that address the harmful conflicts of interest within the banks and other for-profit entities.
Meanwhile, the Australian Investments and Securities Commission (ASIC) has confirmed it is prioritising its work on the 13 matters referred to it by the Royal Commission.
A number of retail super funds, along with the major banks and other for-profit entities are subject to further investigation and possible prosecution for the practices and behaviours that Commissioner Hayne found may have fallen short of the law.
The Australian Investments and Securities Commission (ASIC) has announced it is investigating the progress of transition away from grandfathered conflicted remuneration arrangements for financial advisers.
The investigation, directed by the Treasurer following the Government’s move to end the practice by 1 January 2021, will review the steps taken by industry participants from 1 July 2019 until the 2021 deadline.
ASIC will also investigate any impediments to this transition, and the extent to which benefits are being passed on to affected clients.
The first notice to entities was issued this week. ASIC will analyse the information from both reviews and report to the Treasurer by 30 June 2021.
Infographic data from the Australian Prudential Regulation Authority highlights the significant industry consolidation over the past decade.
APRA’s data shows that from 2008 to 2018 there was a significant reduction in the number of APRA-regulated funds, led by a sharp reduction in corporate funds from 143 to 24.
Whilst there has been a decrease in the number of industry funds, they overtook corporate funds during this period and are now the second most common type of fund with 38 industry funds in 2018. Several mergers announced since this data was collected will reduce this figure further.
Retail superannuation funds remain the most common type of funds with 118 funds.
Speaking at AIST’s Conference of Major Super Funds earlier this year, APRA Deputy Chair Helen Rowell said the introduction of APRA’s prudential framework for superannuation in 2013 had been a key driver of industry consolidation.
The Australian Securities and Investments Commission (ASIC) has made amendments to its climate change disclosure guidance, providing clarity around the liability of company directors in relation to reporting climate risks.
To clarify the application of ASIC’s existing regulatory guidance on climate change risks, the following documents have been updated:
The update to RG 247 seeks to make clear ASIC’s view that the risk of company directors being found liable for a misleading or deceptive forward-looking statement is minimal provided the statements are based on the best available evidence at the time, have a reasonable basis and that there is ongoing compliance with continuous disclosure obligations.
Commissioner John Price stated that climate change is an area of focus for ASIC, identifying it as an area of systemic risk that could impact an entity’s financial prospects.
“Directors should be able to demonstrate they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks,” Mr Price said.
Acceleration of climate-aligned investment
The regulatory updates coincide with the release from the Investor Group on Climate Change of a report that found more than 70% of institutional investors have or are considering climate-aligned targets for their portfolios.
“Climate-aligned investment is continuing to accelerate. Investors are actively looking for opportunities to support climate solutions and embed climate change into whole of portfolio management,” said IGCC CEO Emma Herd.
Other survey findings include:
The Government has released a discussion paper on industry supervisory levies in the wake of the Hayne Royal Commission findings.
The consultation paper gives an overview of the Australian Prudential Regulation Authority’s supervisory levy, and the size and structure of the institutions that are obliged to pay the levy.
Comments are sought broadly on the design and operation of the levies framework and whether it is still fit for purpose given APRA’s expanded functions introduced after the Royal Commission.
Key areas for consultation include whether the current levy base is appropriate and what changes stakeholders would find useful to the annual levy consultation process.
Submissions can be made by emailing firstname.lastname@example.org. The closing date for submissions is 13 September, 2019.
The Australian Prudential Regulation Authority (APRA) has released for consultation amendments to its margin requirements for non-centrally cleared derivatives.
CPS 226 applies to all registrable superannuation entities that transact in material levels of non-centrally cleared derivatives.
The proposed revisions accommodate the decision to delay the final implementation phase for margin requirements by one year to 1 September 2021.
Earlier this month, APRA sent a letter to all APRA-regulated institutions explaining the amendments and inviting feedback.
Submissions on the amendments can be sent to PolicyDevelopment@apra.gov.au by 28 August 2019.
22 August 2019