The recent release of draft guidelines by the Australian Prudential Regulation Authority (APRA) make clear why superannuation funds may increasingly need to turn to trainers and educators with respect to ensuring that trustees meet the new licensing standard.
The funds will need to have a documented policy for training the relevant individuals and the policy should provide for the registrable superannuation entity (RSE) licensee, in reaching a decision about the fitness and propriety of an individual, to give consideration to the following factors:
(a) The person’s competence and experience relative to the duties involved including consideration of whether the person:
(i) possesses the necessary skills, knowledge, expertise, experience, diligence and soundness of judgement to undertake and fulfil the particular duties and responsibilities of the role in question; and
(ii) has demonstrated the appropriate competence in fulfilling occupational, managerial or professional responsibilities previously and/ or in the conduct of their current duties.
The policy should include a listing of the trustee’s minimum requirements (educational, technical and practical) for each role and procedures to test candidates’ claims.
(b) The person’s honesty, integrity and reputation in the conduct of business activities, and reputation within the business and financial community, both domestically and internationally (as appropriate), including consideration of whether the person has:
(i) demonstrated a lack of willingness to comply with regulatory or professional requirements, or been obstructive, misleading or untruthful in dealing with regulatory bodies or a court;
(ii) breached a fiduciary obligation;
(iii) actual or potential conflicts of interest that can influence or appear to influence the entity’s or individual’s ability to carry out their role and functions with the degree of probity and independence required or with regard to the duty of care to superannuation fund members, or failed to deal appropriately with such conflicts;
(iv) been involved in business practices that appear to be negligent, deceitful, oppressive or otherwise improper, or which otherwise reflect discredit on their method of conducting business;
(v) been reprimanded, or disqualified by a professional or regulatory body;
(vi) failed to manage personal debts satisfactorily; or
(vii) been substantially involved in the management of a business or company which has failed, where that failure has been occasioned in part by deficiencies in that management.
The trustee policy should include a process for dealing with persons who are deemed not fit and proper, including a process for removal of such persons in circumstances where it is necessary to do so.
The Superannuation Safety Amendment Bill also contains a provision that APRA may cancel an RSE licence if the licensee is a body corporate and is a disqualified person.
Subsection 120(2) of SIS describes the circumstances when a body corporate will be a disqualified person, including, under subsection 120(2a) where the body corporate knows, or has reasonable grounds to suspect, that a responsible officer is a disqualified person.
Accordingly, the policy of a corporate trustee should include a process for regular checking of the status of responsible officers.
APRA would be unlikely to take action to cancel an RSE licence on the grounds that the body corporate was a disqualified person under 120(2a) — unless the trustee had failed to comply with an APRA-imposed condition on the trustee’s licence in relation to the removal of the responsible officer and then also failed to comply with a subsequent direction to comply with that condition.
