Industry funds have rejected any moves to change board governance arrangements claiming that legal advice shows current rules are sufficient and any changes would create regulatory over-reach.
Industry Super Australia (ISA) has pointed to a legal paper prepared by Hall and Wilcox Lawyers that states the Australian Prudential Regulation Authority (APRA) is already equipped with necessary powers to oversee superannuation board structures.
The paper, prepared for the Australian Institute of Superannuation Trustees, also states that further equipping APRA beyond the current provisions of the Superannuation Industry (Supervision) Act (SIS) would force it to make judgements which should be left to Government.
The stance of ISA has not changed despite the Federal Government agreeing to a number of amendments to the exposure draft legislation, including greater clarity around independent chairs being drawn from the one-third independent directors.
The Hall and Wilcox legal paper stated that, under the proposed changes, APRA would be required to determine if a board director was independent with no criteria described as to how that would be measured and could make decisions around independence criteria through Prudential Standard, effectively bypassing Federal Parliament.
Industry Super Australia (ISA) has pointed to the paper with ISA chief executive David Whiteley questioning what the Federal Government was trying to achieve with the proposed changes.
In particular, ISA highlighted comments in the legal paper comparing the objectives of the Government with the current prudential and legislative requirements which stated “it is difficult to identify existing gaps or areas where APRA does not already have significant powers to step in if it identifies an issue of concern”.
“This legal advice raises doubt about the rationale behind the government’s proposed changes and reinforces the view that the changes are a solution in search of a problem,” Whiteley said.
However the Financial Services Council (FSC) has said it supports the draft legislation released by the Assistant Treasurer, Josh Frydenberg, stating governance reform would raise standards and boost competition across the wider superannuation industry.
FSC chief executive Sally Loane said the changes would benefit all super funds and “did not single out any one fund type, but are actually designed to improve governance across the $1.4 trillion APRA-regulated sector”.
“With the changes, Australian consumers can have more certainty that the entity managing their retirement savings has the highest standard of governance regardless of whether it is a retail, industry, public sector or corporate fund,” Loane said.
