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APRA/ASIC flag sole purpose test review
Recent incidents of superannuation funds pushing the edge of the envelope on the sole purpose test are facing intense scrutiny from both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
APRA deputy chair, Helen Rowell has written superannuation fund trustees informing that the sole purpose test is current regarded as being ambiguous and that it was the subject of discussion during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“Given the questions that have arisen about the appropriate range of activities that fall within the sole purpose test, and its importance in determining the boundaries of practices that may be regarded as acting in the best interests of members, APRA intends to undertake a review, involving ASIC as appropriate, of particular cases or circumstances where compliance with the sole purpose test has been called into question,” Rowell’s letter said.
She said the aim of the review would be to develop clear principles to inform updated guidance and its implementation, as well as “identifying potential breaches where appropriate action should be taken”.
“The review may also lead to recommendations as to whether the law could be clarified to better meet the intent of the sole purpose test,” Rowell’s letter said.
The ASIC and APRA review of the sole purpose test has come amid debate in the superannuation industry about whether the offer of frequent flyer points to attract new members is compliant and possibly breaches early release rules.
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