The Government’s Superannuation Safety Amendment legislation is changing the face of the superannuation sector, particularly for trustees.
Gone are the days when the trusteeship of a superannuation fund was something that could be accommodated alongside a trustee’s full-time job and without too much understanding of corporate governance, asset allocation or investment returns.
Under the new Superannuation Safety Amendment legislation trustees will be licensed and they will need to have a better than passing understanding of the matters impacting on the superannuation funds for which they are responsible.
The realisation of the implications of this new, more onerous environment was evident at the recent Conference of Major Superannuation Funds on the Gold Coast with trustees readily telling Super Review that they regarded attendance as crucial to understanding and meeting their obligations under the new licensing regime.
Similarly, the emergence of trustee education as a major issue has seen financial services educators shift at least a part of their attention away from the implementation of the Financial Services Reform Act towards helping trustees understand their obligations.
The task confronting trustees is made clear when they examine the documentation issued by the Australian Prudential Regulation Authority (APRA), particularly its draft fit and proper operating standard.
What becomes immediately clear to a trustee is that the Government intends to impose minimum competency standards concerning the fitness and propriety of trustees licensed by APRA.
In the words of APRA, this means having: “The overall standard of educational or technical qualifications, knowledge, skills, experience, competence, diligence, judgement, character, honesty and integrity required to satisfactorily discharge the duties and responsibilities of an RSE licensee in a prudent manner.”
The good news for trustees is that APRA makes clear that it does not expect them to suddenly become absolute experts in the field of superannuation and that they can, indeed, employ the services of outsider experts to help them.
However, APRA says that notwithstanding the employment of outside experts, trustees are going to have to be able to demonstrate a “minimum standard of knowledge”. Importantly, the minimum standard of knowledge will be based on the ability of a trustee to understand their duties and responsibilities under the Act.
However, trustees also need to understand that the degree to which they will be tested on their knowledge will depend upon the size and nature of the superannuation fund with which they are involved.
APRA officials have already made clear that they will be treating large, public offer funds very differently to the manner in which they will be looking at smaller, self managed entities.
What no one is discussing, but what seems likely to occur is that the make-up of the trustee boards of superannuation funds is likely to change over time, with people who feel less confident about their understanding and expertise opting not to become involved.
When the guidelines were released for public consultation earlier this year the major industry groups weighed into the debate arguing that perhaps the barrier was being lifted too high.
At the recent CMSF 2004 Conference, APRA’s general manager, superannuation licensing, Tony Randle made clear APRA is proposing there will be seven separate regulations covering:
n defined benefit funds
n licence classes
n minimum capital requirements
n net tangible assets
n registration of superannuation entities and licensed trustees
n risk management
n contributions payable to unregistered funds
He says that in addition to these, there will three separate operating standards covering:
n adequacy of resources
n fit and proper requirements
n outsourcing.
Randle says the adequacy of resources operating standard guidelines provide insight into APRA’s expectation with regard to the maintenance of adequate financial, technological and human resources, while the fit and proper operating standard guideline addresses the assessment of fitness and propriety.
