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Trustee issues with successor fund transfers
Superannuation funds have expressed concern that their trustee directors are being held to higher standards and obligations than those of other entities because of the terms of the Superannuation Industry (Supervision) Act.
The point has been driven home by the Association of Superannuation Funds of Australia (ASFA) in a submission to the Australian Prudential Regulation Authority (APRA) responding to a draft prudential practice guide dealing with successor fund transfers.
The submission said ASFA members had raised concerns that the draft prudential practice guide had not addressed Section 52 of the Superannuation Industry (Supervision) Act 1993 (SIS Act), through which trustee covenants are included in governing rules.
It said that of particular relevance to successor fund transfers was the covenant in paragraph 52(2)(b) of the SIS Act to exercise, in relation to all matters affecting the entity, the same degree of care, skill, and diligence as a prudent superannuation trustee would exercise in relation to an entity.
The submission claimed the existence of this covenant, as well as a trustee's fiduciary duties under general law, meant that a trustee had to have regards to a broader range of considerations than just the requirements of the legislation with respect to successor fund transfers and that related to its was the issue of liability.
"Given the covenant in paragraph 52(2)(b) it can be argued that a trustee of a superannuation fund is held to a higher standard that the board of any other entity," it said.
"Furthermore, under section 52A of the SIS Act, a director of a superannuation trustee company can be personally liable for a breach of a director's covenant."
The ASFA submission said that, on this basis, the draft prudential practice guide needed to be reframed to take account of these factors.
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