House of Representatives

Superannuation Safety Amendment Bill 2003

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan)

5 - Schedule 1 - Licensing, registration and amalgamation

Part 1 - Amendments commencing first

Superannuation Industry (Supervision) Act 1993

Item 1

5.9 Item 1 inserts new items into the table in section 4 of the SIS Act, to reflect the introduction of two new Parts into the SIS Act - Part 2A: Licensing of trustees and groups of individual trustees and Part 2B: Registrable superannuation entities.

Item 2

5.10 This item inserts a new item into the table in section 4 of the SIS Act to reflect the introduction of a new Part into the SIS Act - Part 18: Amalgamation of funds.

Item 3

5.11 This item repeals section 5 of the SIS Act, which is the diagrammatic outline of the key concepts of the Act.

Item 4

5.12 Item 4 amends subparagraph 6(1)(a)(i), to reflect the introduction of two new Parts into the SIS Act - Part 2A: Licensing of trustees and groups of individual trustees and Part 2B: Registrable superannuation entities. The amendment gives APRA responsibility for the general administration of these Parts of the SIS Act.

Items 5, 6 and 13

5.13 Items 5, 6 and 13 amend existing definitions in subsection 10(1) of the SIS Act to reflect the introduction of two new Parts into the SIS Act - Part 2A: Licensing of trustees and Part 2B: Registrable superannuation entities.

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The definition of approved deposit fund is amended to insert a reference to licensed trustees. Part 2A provides for licensed trustees that are constitutional corporations to be trustees of approved deposit funds.
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The definition of approved guarantee is amended to give APRA the power to determine the requirements of an approved guarantee in writing and to make any such determination a disallowable instrument (see also item 17).
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The definition of a reviewable decision is amended to include certain decisions that may be made by APRA under this Bill as reviewable decisions.

Items 7 to 12 and 14 to 16

5.14 Items 7 to 12 and 14 to 16 insert new definitions into subsection 10(1) of the SIS Act. New definitions are inserted for:

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'class';
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'financial services licensee';
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'group of individual trustees';
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'licensing transition period';
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'public offer entity licence';
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'registrable superannuation entity'(RSE);
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'RSE license';
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'RSE licensee'; and
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'RSE licensee law'.

Item 17

5.7 The definition of approved guarantee is amended by inserting section 11E to give APRA the power to determine the requirements of an approved guarantee, in writing, and to make any such determination a disallowable instrument.

Items 18 and 19

5.8 Items 18 and 19 amend section 13 of the SIS Act to remove the reference to a group of two or more individual trustees. This reference is no longer required as the Bill inserts a new definition for a group of individual trustees (see Item 9). Consistent with this amendment, the heading to section 13 is also altered by omitting reference to groups of trustees.

Item 20

5.9 The Bill enables groups of individual trustees collectively to hold a single Registrable Superannuation Entity (RSE) licence, which licenses the members of the group. Item 20 inserts a new section 13A which clarifies that an RSE licence given to a group of individual trustees resides with the group (the RSE licensee) and is not affected by changes in the composition of the group. Section 13A also establishes the basic principles for how RSE licensees that are groups of individual trustees may fulfil their obligations under the SIS Act and Regulations.

5.10 While an RSE licence is given to a group of individual trustees, section 13A generally ensures that the duties and obligations of trustees in respect of regulated superannuation funds continue to reside with each of the individual members of the group. In order to reduce the compliance burden for trustees, section 13A also allows any individual trustee who is a member of a group of individual trustees to discharge any duty or obligation for all of the other members of the group. An exception to this is provided where documents must be signed by the RSE licensee, with all members of the group being required to sign these documents. Where a direction, notice or other document is given to an RSE licensee that is a group of individual trustees, section 13A provides that it is sufficient for the direction, notice or document to be given to any one member of the group. The obligation then rests with that member to appropriately inform the other members of the group of the presence of the direction, notice or document.

5.11 Section 13A is also significant in the context of the penalty provisions contained in the Bill (see Item 29). Where an RSE licensee is a group of individual trustees, the obligations and duties of the RSE licensee fall separately and individually upon each member of the group. Therefore, each member of the group is considered a principle actor and is liable for their own acts and omissions in ensuring that the RSE licensee has fully discharged its obligations and duties.

5.12 A defence is provided in subsection 13A(3) to give protection to persons who have exercised due diligence in the event that an RSE licensee does not discharge its obligations and duties. This provision is modelled on section 731 of the Corporations Act 2001.

5.13 This approach ensures that a group of individual trustees is able to obtain a single RSE licence which licenses all members of the group without compromising the enforceability of provisions that place obligations or duties upon an RSE licensee.

Item 21

5.14 This item makes it clear that where a fund ceases to be a self managed superannuation fund, this occurs at the earlier of the time when either an approved trustee or an RSE licensee is appointed to the fund, or six months after it would cease to be a self managed superannuation fund.

Item 22

5.15 This item amends subsection 17(5) to clarify that the requirement to be licensed under section 29J (see Item 29) applies to a fund that ceases to be a self managed superannuation fund at the earlier of the time that an RSE licensee is appointed, or six months after it would cease to be a self managed superannuation fund. This requirement applies even if the reason that the fund ceases to be a self managed superannuation fund is the admission of new members to the fund.

Item 23

5.16 This item amends subsection 21(2) of the SIS Act to explain the significance of the approval or licensing of trustees. It repeals the existing subsection 21(2) and substitutes a new subsection. Part 2 of the Act will operate concurrently with Part 2A that is inserted by this Bill.

5.17 The significance of the approval process is that a fund cannot be an approved deposit fund unless it is maintained by an approved trustee or an RSE licensee that is a constitutional corporation (paragraph 21(2)(a)), and the trustee of a public offer entity must not issue or offer superannuation interests in public offer entities unless the trustee is an approved trustee or an RSE licensee that is a constitutional corporation (paragraph 21(2)(b)).

5.18 A person must not be, or act as, the trustee of a superannuation fund with fewer than 5 members (other than a self managed superannuation fund) if the person is required by the SIS Act to be an approved trustee or an RSE licensee that is a constitutional corporation (paragraph 21(2)(c)). APRA may suspend the trustee of a superannuation fund with fewer than 5 members if the trustee is acting in this capacity without meeting the requirements of paragraph 21(2)(c).

Item 24

5.19 This item adds a new subsection (1A) to the SIS Act, which prevents a constitutional corporation from making an application to be an approved trustee during the licensing transition period (see Item 10). This is a transitional provision, which ensures constitutional corporations can make applications only for RSE licenses under Part 2A, rather than to be approved trustees under the existing provisions of Part 2, once the licensing transition period has commenced.

Item 25

5.20 This item provides that APRA can only approve an applicant as a trustee under Part 2 of the SIS Act if the application is made before the licensing transition period commences (see Item 10).

Item 26

5.21 This item inserts a new subsection 27(7) in the SIS Act allowing Regulations to be made defining 'net tangible assets' for the purposes of section 26.

Items 27 and 28

5.22 These items amend paragraph 27(b) and paragraph 27E(b) of the SIS Act respectively to ensure that a trustee approval granted under section 26 of the SIS Act, or a variation granted under sections 27B or 27C, remains in force until it is revoked, subsequently varied or the trustee becomes an RSE licensee.

Item 29

5.23 Item 29 inserts two new Parts into the SIS Act. Part 2A establishes a new regime for licensing of trustees and groups of individual trustees, while Part 2B establishes a new regime for the registration of registrable superannuation entities (see Item 12).

Part 2A - Licensing of trustees and groups of individual trustees

5.24 Division 1 of Part 2A sets out the object of Part 2A and the relationship of this Part to other provisions contained in the SIS Act.

5.25 Section 29A sets out the object of Part 2A, which is to provide for the granting of RSE licenses to trustees who are constitutional corporations, other bodies corporate and groups of individual trustees (see Item 20 for provisions concerning the conduct of groups of individual trustees who become RSE licensees).

5.26 Section 29A also outlines some of the key relationships between licensing and other key provisions of the SIS Act. Of particular importance is the relationship between licensing, election to become a regulated superannuation fund under section 19 and certain penalty provisions, most notably section 29J which is introduced in this Bill.

5.27 The interaction between these provisions is specifically designed to ensure trustees who are not trustees of superannuation entities immediately prior to the commencement of the licensing transition period (new trustees) obtain an RSE licence before making an election to have superannuation entities under their trusteeship regulated by the SIS Act. New trustees of superannuation entities who make an election to have the entity regulated under the SIS Act would immediately be in breach of section 29J if they had not previously become an RSE licensee.

5.28 Transitional provisions apply for trustees who are trustees of registrable superannuation entities immediately prior to the commencement of the licensing transition period. These trustees must obtain an RSE licence by the end of the licensing transition period in order to be able to continue to operate as trustees of these entities.

5.29 Subsection 29A(2) also outlines the importance of registering a registrable superannuation entity under Part 2B. The Bill omits an explicit provision to penalise a body corporate or a group of individual trustees that is an RSE licensee for not registering a registrable superannuation entity. However, failure to register a registrable superannuation entity may result in an RSE licensee breaching a licence condition, which may result in a possible loss of the licensee's RSE licence. Furthermore, accepting contributions while a registrable superannuation entity is not registered may lead to an offence under section 34 of the SIS Act.

5.30 Section 29B establishes that there are to be classes of RSE licences and provides for two broad classes of licences. One class is described in subsection 29B(2) and is designed to permit holders of this class of licence to operate public offer superannuation entities. Holders of this class of licence may be required to meet additional prudential requirements (see for example section 29DA). Provision has also been made in subsection 29B(2) for Regulations to specify other registrable superannuation entities for which trustees must hold this class of licence, where this may be warranted on prudential grounds.

5.31 Subsection 29B(3) provides for a second class of RSE licence which will allow holders of this class of licence to operate registrable superannuation entities that are not covered by the licence class established under subsection 29B(2). It is intended that this class of licence would generally be given to trustees of non-public offer superannuation entities.

5.32 Section 29B also provides for other classes of RSE licences to be established by Regulations. This will allow additional RSE licence classes to be introduced for particular types of superannuation entities, where appropriate, to improve the prudential regulation of these entities. Additional classes made by Regulations may be sub-classes of the two classes established by subsections 29B(2) and 29B(3), or include one or more other classes of RSE licences.

5.33 Sections 29C to 29CC establish processes for applying for RSE licences. Section 29C establishes who may apply for RSE licences, the requirements for applications and requirements for notifying certain changes to pending applications. Provision is also made in section 29C for Regulations to establish different application fees for different RSE licence classes.

5.34 Subsections 29C(1) to 29C(3) establish who may apply for RSE licences. Constitutional corporations may apply for any class of licence, while bodies corporate that are not constitutional corporations and groups of individual trustees may not apply for a licence that allows them to be trustees of a public offer entity (for example, the class of licence provided for in subsection 29B(2)). These restrictions are consistent with the existing restrictions under Part 2 of the SIS Act which only allow constitutional corporations to gain approval to operate public offer superannuation entities.

5.35 Subsection 29C(4) sets out the requirements for an application for an RSE licence. These requirements include that it must be in the approved form, contain the information required by the approved form, be accompanied by the required application fee, an up to date copy of the risk management strategy and a signed statement that the risk management strategy complies with section 29H.

5.36 Subsection 29C(5) permits regulations to prescribe an application fee for the purposes of paragraph 29C(4)(c) to prescribe different application fees for different classes of RSE licences.

5.37 In order to ensure APRA has up to date information concerning applicants for RSE licences and their intended activities, subsections 29C(6) to 29C(8) include requirements for bodies corporate and groups of individual trustees to notify APRA of any membership changes or changes to their risk management strategy. If an applicant fails to notify APRA of any such changes, under subsection 29C(9), the application will not comply with section 29C and APRA cannot grant an RSE licence under section 29D.

5.38 Section 29CA gives APRA the power to request additional information from a body corporate or a group of individual trustees who have applied for an RSE licence. APRA must specify a reasonable time for complying with the request. Subsection 29CA(2) permits APRA to deem an application as having been withdrawn if the applicant does not provide the requested information within the specified time and does not have a reasonable excuse for not doing so. Under subsection 29C(3), APRA must take all reasonable steps to inform the applicant if it treats an application as having been withdrawn. See also section 29JE, which provides use immunity in respect of information provided under section 29CA.

5.39 Different arrangements are provided for APRA to decide applications from persons who are trustees of registrable superannuation entities at the beginning of the licensing transition period (existing trustees) and other trustees (generally new trustees).

5.40 Section 29CB establishes arrangements for deciding applications from existing trustees. Subsection 29CB(1) provides existing trustees with the option of giving APRA an advance notification of intent to apply for an RSE licence. Subsection 29CB(2) provides that APRA must decide applications for RSE licences made in the licensing transition period by bodies corporate who are existing trustees, or from groups of individual trustees with one or more members who are existing trustees, by the end of the licensing transition period. In addition, subsection 29CB(3) gives APRA the discretion to refuse to consider any further licence applications from existing trustees that are received by APRA in the last 6 months before the end of the licensing transition period. In combination, these provisions are designed to encourage existing trustees to make early applications for RSE licences and provide APRA with flexibility to manage peaks in the flow of applications, in particular towards the end of the licensing transition period.

5.41 Section 29CC establishes time periods for deciding applications received after the end of the licensing transition period and, during the licensing transition period, from bodies corporate and groups of individual trustees who are not trustees at the beginning of that period (new trustees). Generally, APRA will have 90 days to decide these applications, with the power to extend this period by a further 30 days.

Granting RSE licences

5.42 Section 29D establishes the conditions which, if met, require APRA to grant an RSE license to a body corporate or a group of individual trustees.

5.43 Subsection 29D(1) provides that APRA must grant an RSE licence to a body corporate or a group of individual trustees, if it has no reason to believe that the applicant would fail to comply with the RSE law (see Item 16) or any conditions imposed on the RSE licence, if the licence was granted. The application must comply with section 29C and be for a class of licence that the body corporate or group of individual trustees may apply for under that section. APRA must be satisfied (paragraph 29D(1)(d)) that if the applicant is a body corporate that the body corporate meets the standards prescribed under Part 3 relating to fitness and propriety for trustees of funds and RSE licensees. If the applicant is a group of individual trustees, APRA must be satisfied that the group as a whole meets the standards relating to fitness and propriety prescribed under Part 3 for RSE licensees. In addition, APRA must be satisfied that each member of the group meets the standards prescribed under Part 3 relating to fitness and propriety for trustees of funds.

5.44 Where an applicant is not a constitutional corporation, paragraph 29D(1)(f) requires APRA to be satisfied that the body corporate or group of individual trustees only intend to act as trustee for one or more superannuation funds that each have governing rules providing that the sole or primary purpose of the fund is the provision of old-age pensions.

5.45 Where the application is for a class of licence that enables a trustee that holds that class of licence to be the trustee of a public offer entity subject to any condition imposed under subsection 29EA(3), paragraph 29D(1)(g) requires APRA to be satisfied that the applicant is a constitutional corporation that meets the capital requirements under section 29DA.

5.46 Section 29DA establishes the capital requirements that must be satisfied by a constitutional corporation before being granted an RSE license or having an RSE licence varied so as to result in the constitutional corporation being required to meet capital requirements. Subsection 29DA(6) provides for Regulations to be made defining 'net tangible assets' for the purposes of section 29DA.

5.47 Section 29DB provides that if APRA decides to grant a body corporate or group of individual trustees an RSE licence, it must give the body corporate or group a licence specifying a unique licence number and the licence class. In the case of a licence given to a group of individual trustees, Item 20 ensures that the licence resides with the group and is not affected by changes in the composition of the group.

5.48 Section 29DC lists the types of documents which RSE licensees must ensure include the unique RSE licence number given to an RSE licensee under section 29DB. Section 29DC also allows APRA to give written approval to RSE licensees to not require them to include the licence number in a document or class of documents. An example of when this provision may be used is during the licensing transition period to allow existing trustees who become RSE licensees to run down existing stocks of stationery before including the licence number on newly printed stock.

5.49 Section 29DD establishes when an RSE licence comes into force and the circumstances in which it continues in force. These provisions are modelled on similar provisions applying to approvals given to trustees under the existing Part 2 of the SIS Act.

5.50 Section 29DE establishes arrangements for giving a notice if APRA refuses an application by a body corporate or group of individual trustees for an RSE licence.

Conditions on RSE licences

5.51 Section 29E imposes a range of conditions on RSE licences. Subsection 29E(1) lists the conditions that are imposed on all RSE licences and, if the RSE licensee is a group of individual trustees, each of the members of the group. Provision has also been made under paragraph 29E(1)(g) for other conditions to be specified in Regulations. This provision allows additional conditions to be imposed on all RSE licences in a timely manner where necessary. Additional conditions are also imposed on certain classes of RSE licensees by subsections 29E(3) to 29E(6). See also the offence provision, section 29JA.

5.52 Section 29EA gives APRA the power to impose additional conditions on a single RSE licence as long as those conditions are not inconsistent with conditions that are imposed under section 29E (subsections 29EA(1) and 29EA(2)). This ensures that APRA is able to impose conditions on individual RSE licences, in particular where there may be a specific prudential risk applying to that RSE licensee.

5.53 Subsections 29EA(3) and 29EA(4) provide for particular types of additional conditions concerning restrictions on registrable superannuation entities for which RSE licensees may act as the trustee and compliance with alternative agreed representation rules under section 92 of the SIS Act.

5.54 Subsection 29EA(5) requires APRA to consult with ASIC where the RSE licensee also holds an Australian Financial Services Licence (AFSL) and the imposition of a condition may affect the RSE licensee's ability to provide financial services. Consultation will help to ensure consistent approaches to the regulation of RSE licensees who are also holders of an AFSL. However, failure by APRA to consult with ASIC does not invalidate any additional condition that is imposed (subsection 29EA(6)). Subsection 29EA(7) clarifies when an additional condition comes into force. In relation to section 29EA, see also the offence provision, section 29JA.

5.55 Section 29EB gives APRA the power to direct an RSE licensee to comply with a licence condition within a specified time where APRA has reasonable grounds to believe that the RSE licensee has breached the licence condition.

5.56 This power is significant, because while breaching a licence condition does not directly result in an RSE licensee committing an offence, failure to comply with an APRA direction given under section 29EB may result in the RSE licensee committing an offence under section 29JB. Section 29EB does not include a minimum timeframe for complying with a request because it is necessary to ensure APRA has some flexibility in setting timeframes that are reasonable in the circumstances, given the nature of the information that is being request and the level of prudential risk involved. APRA may also cancel an RSE licence under section 29G if an RSE licensee fails to comply with a licence condition.

Varying RSE licences

5.57 Section 29F provides for RSE licensees to apply to APRA for a variation so that it is a licence of a different class and/or for a variation or revocation of a condition that has been imposed by APRA on an RSE licence.

5.58 Section 29FA gives APRA power to request additional information in respect of an application made under section 29F. This provision ensures that APRA is able to obtain relevant information pertaining to the application. Section 29FA also provides that APRA may treat an application under section 29F as having been withdrawn if the requested information has not been provided by the RSE licensee within the time specified in the initial request and the RSE licensee does not have a reasonable excuse for not complying with the request.

5.59 Section 29FA does not include a minimum timeframe for complying with a request for additional information because it is necessary to ensure APRA has some flexibility in setting timeframes that are reasonable in the circumstances, given the nature of the information that is being requested and the level of prudential risk involved. (See also section 29JE which provides use immunity in respect of information provided under section 29FA.).

5.60 Section 29FB establishes time periods to decide applications under section 29F. Under this provision, APRA has 60 days to decide an application to vary an RSE licence, but may extend this period by a further 60 days.

5.61 Section 29FC establishes the circumstances in which APRA may vary an RSE licence on application from the licensee and processes for informing the applicant. APRA may not vary an RSE licence unless APRA is satisfied that the RSE licensee will comply with the conditions imposed on the licence, including conditions as varied, and that any varied condition is not inconsistent with conditions imposed by section 29E. Under paragraph 29FC(2)(c), APRA must also consult with ASIC in certain circumstances. Consultation will help to ensure consistent approaches to the regulation of RSE licensees who also are AFSL holders. However, failure by APRA to consult with ASIC does not invalidate any variation of conditions (subsection 29FC(3)). Subsection 29FC(4) provides that APRA is not required to vary the class of, or vary or revoke any condition of, an RSE licence in a manner other than as requested by the RSE licensee in an application under 29F.

5.62 Section 29FD provides that APRA may vary or revoke an RSE licence condition on its own initiative as long as the variation or revocation is not inconsistent with any condition imposed under section 29E and, if the RSE licensee is also the holder of an AFSL, that APRA consults with ASIC in certain circumstances. Consultation will help to ensure consistent approaches to the regulation of RSE licensees who are also AFSL holders. However, failure by APRA to consult with ASIC does not invalidate any variation or revocation under this section (subsection 29FD(3)).

5.63 Section 29FE establishes processes for APRA to notify RSE licensees of APRA's decisions in respect of variations or revocations under sections 29FC and 29FD.

5.64 Section 29FF establishes when a variation or revocation of an RSE licence condition by APRA comes into force. The provisions in section 29FF are consistent with section 29DD, which establishes when an RSE licence comes into force and the circumstances in which it continues in force.

Cancelling RSE licences

Section 29G gives APRA the power to cancel in writing RSE licences in certain circumstances. These circumstances include where RSE licensees:

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have requested that their licences be cancelled;
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are bodies corporate and disqualified persons for the purposes of Part 15 of the SIS Act (RSE licensees who are groups of individual trustees cannot, as a group, be disqualified persons for the purposes Part 15);
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have breached, or APRA has reason to believe they will breach, a licence condition imposed on the licence; or
·
failed to comply, or APRA has reason to believe they will fail to comply, with a direction by APRA under section 29EB.

5.65 With the exception of requests from the RSE licensee that their licences be cancelled and where RSE licensees are bodies corporate and disqualified persons, subsection 29G(3) requires APRA to gain the Minister's written consent before cancelling an RSE licence. Subsection 29G(4) establishes a process for APRA to notify RSE licensees of decisions to cancel RSE licences.

5.66 Section 29GA requires APRA to consult with ASIC in certain circumstances before cancelling an RSE licence and to notify ASIC after it has cancelled an RSE licence. Consultation will help to ensure consistent approaches to the regulation of RSE licensees who are also holders of an AFSL. However, failure by APRA to consult with ASIC does not invalidate a cancellation under section 29G (subsection 29GA(3)).

5.67 Section 29GB gives APRA the power to allow an RSE licence to continue in effect in respect of specified provisions of the SIS Act and Regulations, or any other law of the Commonwealth, that is administered by APRA after the RSE licence has been cancelled under section 29G. This provision is designed to ensure persons or groups of individuals who have had their RSE licences cancelled can continue to perform certain specified duties in respect of a registrable superannuation entity, for example, processes associated with winding up a registrable superannuation entity or transferring members' benefits under the successor fund arrangements contained in the SIS Act.

Risk management strategies

5.68 An important feature of the Bill is the requirement for RSE licensees to have a risk management strategy concerning their activities as trustees of registrable superannuation entities (see paragraph 29E(1)(c)).

5.69 Section 29H provides that a risk management strategy for an RSE licensee must set out reasonable measures and procedures that apply to identify, monitor and manage a range of risks that may arise in respect of the operations of the RSE licensee. Subsection 29H(2) sets out a range of risks that must be explicitly addressed in the risk management strategies of RSE licensees. Subsection 29H(3) establishes processes for RSE licensees to sign risk management strategies.

5.70 Subsection 29H(4) places restrictions on provisions that may be incorporated in risk management strategies by reference. This provision is designed to ensure that APRA is able to access all the provisions contained in risk management strategies, including provisions included by reference. Subsection 29H(5) permits information contained in a risk management plan for an entity of which an applicant for an RSE licence is, or proposes to be, the RSE licensee, to be reproduced in the risk management strategy.

5.71 Section 29HA establishes requirements for maintaining and regularly reviewing risk management strategies. These provisions are designed to ensure that the risk management strategies of RSE licensees are up to date and relevant to the current operations of the RSE licensee.

5.72 Section 29HB provides for modifications to be made to risk management strategies, or for risk management strategies to be repealed and replaced. This may occur at the RSE licensee's behest or on direction from APRA (in the case of a modification only). The modified or replaced risk management strategy must comply with section 29H. Subsection 29HB(4) establishes timeframes for an RSE licensee to comply with a direction to modify a risk management strategy. Unlike other provisions concerning directions or requests from APRA contained in the Bill, this provision contains a minimum timeframe of 14 days after the direction is given to an RSE licensee by APRA.

5.73 Section 29HC establishes requirements for notifying APRA of modifications of risk management strategies or when risk management strategies are repealed and replaced. A person commits an offence of fault liability or strict liability if the person fails to notify APRA of modifications of risk management strategies or when risk management strategies are repealed and replaced. The fault liability offence carries a penalty of 50 penalty units, while the strict liability offence carries a penalty of 25 penalty units (see the Outline for further background on the offence provisions contained in the Bill).

5.74 Section 29HD gives APRA the power to request information concerning a risk management strategy via a notice given to the RSE licensee. This provision is designed to ensure that APRA is able to gain all relevant information concerning an RSE licensee's operations and is a central aspect of the enhanced supervisory regime that is being introduced by this Bill. Section 29HD does not include a minimum timeframe for complying with a request for additional information because it is necessary to ensure APRA has some flexibility in setting timeframes that are reasonable in the circumstances, given the nature of the information that is being requested and the level of prudential risk involved.

5.75 A person commits an offence of fault liability or strict liability if the person fails to comply with a notice from APRA requesting information concerning a risk management strategy. The fault liability offence carries a penalty of 50 penalty units, while the strict liability offence carries a penalty of 25 penalty units (see the Overview for further background on the offence provisions contained in the Bill). An offence is not committed if the person has a reasonable excuse for a failure to comply with a notice from APRA. Section 29JE provides use immunity in respect of information provided under section 29HD.

Offences and self incrimination

5.76 One of the primary functions of the Bill is to require all superannuation trustees to be licensed. Section 29J is the key offence of the proposed regime that achieves this outcome. In general terms, subsection 29J(1) provides that a person must not be, or act as, a trustee of a registrable superannuation entity unless the person holds an RSE licence, or is a member of a group of individual trustees that holds an RSE licence that enables the person to be a trustee of that entity, or, during the licensing transition period, the person is an approved trustee.

5.77 Subsection 29J(1) also includes two further provisions (paragraphs 29J(1)(c) and 29J(1)(d)) which provide that a person who is, or acts as, a trustee of a registrable superannuation entity is not required to hold an RSE licence if:

·
the person has been a trustee of the entity for less than 30 days and at least one other trustee of the entity was a trustee immediately before the start of the licensing transition period; or
·
the person and at least one other trustee of the entity who was a trustee immediately before the start of the licensing transition period have applied for an RSE licence and the application has not been finally determined or disposed of.

5.78 These two provisions operate to require groups of individual trustees that have some members who are trustees immediately before the start of the licensing transition period and some who are not, to make an application within 30 days of the group forming and becoming trustees of a registrable superannuation entity. The purpose of these provisions is to remove any doubt as to when a group of individual trustees that has a mixture of existing trustees and new trustees must apply for an RSE licence.

5.79 The structure of subsection 29J(1) is such that trustees will be required to obtain an RSE licence before they make an election to have superannuation entities under their trusteeship regulated by the SIS Act. This is because the meaning of registrable superannuation entity given in Item 12 includes all regulated superannuation entities, and a trustee of a regulated superannuation entity would immediately be in breach of section 29J if they had not previously become an RSE licensee.

5.80 Subsection 29J(3) provides that a person commits an offence if the person fails to comply with subsection 29J(1), with a penalty of 2 years imprisonment and/or 120 penalty units.

5.81 Subsection 29J(4) provides that a person commits an offence if the person is a body corporate and is not the only trustee of a registrable superannuation entity. Under subsection 29J(5), a person commits an offence if the person fails to comply with subsection 29J(4), with a penalty of 2 years imprisonment and/or 120 penalty units. This provision is modelled on subsection 152(2A) of the SIS Act and aims to clarify existing requirements in relation to bodies corporate that are trustees of regulated superannuation funds. A reduced penalty applies in respect of section 29J because this provision applies to the conduct of all trustees, and not just those trustees that are trustees of public offer funds, as in the case of section 152.

5.82 Section 29JA introduces an offence where an RSE licensee fails to notify APRA as soon as practicable, and in any event within 14 days, after becoming aware that the RSE licensee is in breach of a condition imposed on an RSE licence under sections 29E or 29EA. The offence is a strict liability offence, which carries a penalty of 50 penalty units.

5.83 Section 29JB introduces an offence where an RSE licensee fails to comply with a direction from APRA to comply with a licence condition under section 29EB.

5.84 Section 29JC introduces an offence where an RSE licensee fails to comply with a direction from APRA to modify a risk management strategy under section 29HB. The offence is a strict liability offence, which carries a penalty of 60 penalty units.

5.85 The offences for sections 29JB and 29JC are strict liability offences, which carry a penalty of 60 penalty units. The penalties are set at this level because a direction under sections 29EB or 29HB will be targeted at minimising a specific prudential risk and failure to comply with a direction amounts to a serious offence.

5.86 Section 29JD clarifies that any contravention of sections 29J, 29JA, 29JB and 29JC does not affect the validity of a superannuation interest or any other act. This provision is designed to protect the interests of members of registrable superannuation entities where the trustee of that entity is in contravention of sections 29J, 29JA, 29JB or 29JC. This provision is based on similar provisions that are included in other Parts of the SIS Act.

5.87 Section 29JE affords protection of privilege against self-incrimination by providing use immunity to persons giving information under sections 29CA, 29FA and 29HD. Section 29JE does not extend the protection of privilege against self-incrimination to derivative use immunity because it has been APRA's experience that these immunities make it exceptionally difficult to pursue prosecutions under the SIS Act. Given the strong growth in superannuation savings, and the increasingly important role they play in ensuring that people make adequate provision for their income in retirement, there is an overwhelming public interest in protecting the rights of fund members. Therefore it is considered that removal of these immunities is warranted in order to allow the Regulator to more effectively prosecute persons who contravene the SIS Act.

Part 2B - Registrable superannuation entities

5.88 Item 29 also inserts Part 2B, which establishes a regime for the registration of registrable superannuation entities.

5.89 Division 1 of Part 2B sets out the object of the Part. Section 29K establishes that the object of Part 2B is to provide for the registration of registrable superannuation entities. Registration of registrable superannuation entities is important as it serves as a mechanism by which APRA can gain important information about superannuation entities that it regulates, in a systematic manner. As a consequence of the registration process, APRA must receive information about registrable superannuation entities before the RSE licensee of those entities will be able to operate those entities. The provision of this information to APRA is intended to ensure that APRA has information about the superannuation entities it regulates, before those entities begin operating in the superannuation industry.

5.90 Registration of registrable superannuation entities is also significant to RSE licensees, as they may breach the licence condition imposed under paragraph 29E(1)(d) if they have not registered, or applied for the registration of, the registrable superannuation entities of which they are the RSE licensee. APRA can cancel an RSE licence if a condition of the licence is breached. The Government also intends to make operating standards concerning the acceptance of contributions to, deposits with, or the acquisition of units in registrable superannuation entities that have not been registered under Part 2B.

Applying for registration

5.91 Division 2 of Part 2B provides a process for applications to be made for the registration of registrable superannuation entities. Subsection 29L(1) provides that RSE licensees may apply to APRA for registration of registrable superannuation entities of which they are the RSE licensee. It is intended that only the RSE licensee of a registrable superannuation entity may apply to APRA for its registration. Therefore, a body corporate trustee or group of individual trustees of a registrable superannuation entity must apply for, and be granted, an RSE licence before an application for registration of the registrable superannuation entity can be submitted and determined.

5.92 Subsection 29L(2) establishes requirements for applications for the registration of registrable superannuation entities. These requirements include that the application must be in the approved form and contain such information as required by the form. Additionally, the application must be accompanied by up to date copies of the entity's trust deed, governing rules, risk management plan and a statement signed by the RSE licensee that the risk management plan complies with section 29P. The requirements for applications of registrable superannuation entities are intended to ensure that APRA is provided with sufficient information about the fund to assist it in performing its role as prudential regulator.

5.93 Subsections 29L(3), (4) and (5) require that if the trust deed, governing rules or risk management plan of a registrable superannuation entity change after an application has been made for its registration by APRA, but before the application has been determined, the RSE licensee of the registrable superannuation entity must lodge an up to date copy of the trust deed, governing rules or risk management plan. Subsection 29L(6) provides that if these requirements are contravened, an application does not comply with section 29L. (This is significant as APRA must refuse to register a registrable superannuation entity if the application for registration does not comply with section 29L.)

5.94 Subsection 29L(7) provides that an application for registration of a registrable superannuation entity lapses if it was made by an RSE licensee and the RSE licensee ceases to be an RSE licensee before APRA has decided the application for registration or, if APRA has made a decision on the application which is the subject of a review, before the review is finalised, or otherwise disposed of. This reinforces the policy intent that only registrable superannuation entities which have an RSE licensee may be registered by APRA.

5.95 Section 29LA provides APRA with a discretion to request that an RSE licensee of a registrable superannuation entity who has made an application to register that entity provide additional information regarding the application. A failure to provide the requested information will result in a delay to APRA's determination regarding the registration of the registrable superannuation entity.

5.96 Section 29LB establishes the period in which APRA must decide applications for registration of registrable superannuation entities. APRA must decide an application for registration of a registrable superannuation entity within 21 days of receiving the application or within 21 days of receiving information which it has requested from the RSE licensee of the registrable superannuation entity under Section 29LA. However, APRA may extend this period by a maximum of 7 days by written notice given to the RSE licensee of the registrable superannuation entity within the period in which it would otherwise have been required to decide the application for registration. It is intended that APRA should be able to extend the period only once. Section 29LB also provides that an application that APRA has not decided within the required time is deemed to have been refused by APRA.

Registration

5.97 Division 3 of Part 2B provides for the registration of registrable superannuation entities. Section 29M establishes that APRA must only register a registrable superannuation entity if the application for its registration complies with section 29L and the applicant has provided APRA with all information that the applicant was requested to provide regarding the application under section 29LA. Additionally, APRA must be satisfied that nothing in the registrable superannuation entity's governing rules conflicts with Part 6 of the Act, which deals with provisions relating to the governing rules of superannuation entities.

5.98 Section 29MA provides for the allocation of a unique registration number and requirements for notifying the RSE licensee of a registrable superannuation entity where APRA has registered the entity under section 29M.

5.99 Section 29MB lists the types of documents on which RSE licensees must include the registration number given to a registrable superannuation entity under section 29MA. Section 29MB also allows APRA give written approval to the RSE licensees to not require them to include the registration number in a document or class of documents. An example of when this provision may be used is during the licensing transition period for registrable superannuation entities that are already in existence at the beginning of the licensing transition period, to allow them to run down existing stocks of stationery before including the registration number on newly printed stock.

5.100 Section 29MC establishes requirements for APRA to give RSE licensees a notice if APRA refuses an application to register a registrable superannuation entity.

Cancelling registration

5.101 Section 29N establishes the circumstances in which APRA must cancel the registration of a registrable superannuation entity. The circumstances in which a registration may be cancelled are where the entity has been wound up; where the entity has no beneficiaries and no assets and there are no outstanding claims against the entity for benefits or other payments; or in any other circumstances that may be prescribed by Regulations. Section 29N also establishes requirements for APRA to give RSE licensees a notice if APRA cancels the registration of a registrable superannuation entity.

Risk management plans

5.102 Section 29P provides that a risk management plan for a registrable superannuation entity must set out reasonable measures and procedures that the RSE licensee of the entity is to apply to identify, monitor and manage a range of risks that may arise in the operation of the entity. Subsection 29P(2) sets out a range of risks, which must be explicitly addressed in the risk management plans of registrable superannuation entities. Subsection 29P(3) establishes processes for RSE licensees to sign risk management plans.

5.103 Subsection 29P(4) places restrictions on provisions, which may be incorporated in risk management plans by reference. This provision is designed to ensure that both APRA and the members and employer-sponsors of registrable superannuation entities are able to access all the provisions contained in risk management plans. Subsection 29P(5) permits information contained in a risk management strategy of an RSE licensee of an entity to be reproduced in the risk management plan for the entity.

5.104 Section 29PA establishes requirements for maintaining and regularly reviewing risk management plans. These provisions are designed to ensure that the risk management plans of registrable superannuation entities are kept up to date and relevant to the current operations by the RSE licensee of the entity.

5.105 Section 29PB provides for modifications to risk management plans to be made, or for risk management plans to be repealed and replaced. This may occur at the behest of an RSE licensee of a registrable superannuation entity or on direction from APRA (in the case of a modification only). The modified or repealed and replaced risk management plan must comply with section 29P. Subsection 29PB(4) establishes timeframes for an RSE licensee to comply with a direction to modify a risk management plan.

5.106 Section 29PC establishes requirements for notifying APRA when risk management plans are modified or repealed and replaced. A person commits an offence of fault liability or strict liability if the person fails to notify APRA within 14 days of a risk management plan having been modified or repealed and replaced. The fault liability offence carries a penalty of 50 penalty units, while the strict liability offence carries a penalty of 25 penalty units (see the Outline for further background on the offence provisions contained in the Bill).

5.107 Section 29PD establishes that a member, unit holder or employer-sponsor of a registrable superannuation entity that has been registered under Part 2B may request a copy of the entity's risk management plan from the RSE licensee of the entity. The RSE licensee must make a copy of the plan available to the member, unit holder or employer-sponsor free of charge.

5.108 Section 29PE gives APRA the power to request information concerning a risk management plan of a registrable superannuation entity that has been registered under Part 2B, via a notice given to the RSE licensee of the entity. This provision is designed to ensure that APRA is able to gain all relevant information concerning the operations of the entity and the RSE licensee of the entity and is a central aspect of the enhanced supervisory regime that is being introduced by this Bill. Section 29PE does not include a minimum timeframe for complying with a request for additional information because it is necessary to ensure APRA has some flexibility in setting timeframes that are reasonable in the circumstances, given the nature of the information that is being requested and the level of prudential risk involved.

5.109 A person commits an offence of fault liability or strict liability if the person fails to comply with a notice from APRA requesting information concerning a risk management plan. The fault liability offence carries a penalty of 50 penalty units, while the strict liability offence carries a penalty of 25 penalty units (see the Outline for further background on the offence provisions contained in the Bill). An offence is not committed if a person has a reasonable excuse for failing to comply with a notice from APRA requesting information. Section 29QB provides use immunity in respect of information provided under section 29PE.

Offences and self incrimination

5.110 Section 29Q introduces an offence where an RSE licensee of a registrable superannuation entity that has been registered under Part 2B fails to comply with a direction from APRA to modify the risk management plan of the entity under section 29PB. The offence is a strict liability offence, which carries a penalty of 60 penalty units.

5.111 Section 29QA clarifies that any contravention of section 29Q does not affect the validity of a superannuation interest or any other act. This provision is designed to protect the interests of members of registrable superannuation entities where the RSE licensee breaches section 29Q. This provision is based on similar provisions that are included in other Parts of the SIS Act.

5.112 Section 29QB affords protection of privilege against self-incrimination by providing use immunity to persons giving information under sections 29LA and 29PE. As with section 29JE, section 29QB does not extend the protection of privilege against self-incrimination to derivative use immunity.

Item 30

5.113 This item repeals the existing heading to Part 3 of the SIS Act and substitutes a new heading to reflect that the operating standards will deal with issues regarding superannuation fund trustees and RSE licensees in addition to the superannuation funds themselves.

Item 31

5.114 The amended section 30 provides that the object of Part 3 is to provide for a system of standards prescribed by regulations (operating standards) applicable to the operation of regulated superannuation funds, approved deposit funds and pooled superannuation trusts, and to trustees and RSE licensees of those funds and trusts.

Item 32

5.115 This item amends subsection 31(1) of the SIS Act to permit operating standards to be prescribed for the operation of trustees and RSE licensees of regulated superannuation funds.

Item 33

5.116 This item amends paragraph 31(2)(l) to permit operating standards to be prescribed for the management of investments, in addition to the investments themselves, of regulated superannuation funds.

Item 34

5.117 This item inserts paragraph 31(2)(ma) to permit operating standards to be prescribed for the fitness and propriety of RSE licensees and trustees of regulated superannuation funds.

Item 35

5.118 This item inserts paragraph 31(2)(pa) to permit operating standards to be prescribed for the disclosure of information by a member of a group of trustees of a regulated superannuation fund to other members of the group of trustees of that same fund.

Item 36

5.119 This item inserts paragraphs 31(2)(sa) and 31(2)(sb) to permit operating standards to be prescribed for the outsourcing arrangements relating to the operation of funds and the adequacy of resources, including human, technical and financial resources, of regulated superannuation funds.

Item 37

5.120 This item amends subsection 32(1) to permit operating standards to be prescribed for the operation of trustees and RSE licensees of approved deposit funds.

Item 38

5.121 This item inserts paragraph 32(2)(aa) to permit operating standards to be prescribed for the circumstances in which amounts may be deposited with approved deposit funds.

Item 39

5.122 This item amends paragraph 32(2)(f) to permit operating standards to be prescribed for the management of investments, in addition to the investments themselves, of approved deposit funds.

Item 40

5.123 This item inserts paragraph 32(2)(fa) to permit operating standards to be prescribed for the fitness and propriety of RSE licensees and trustees of approved deposit funds.

Item 41

5.124 This item inserts paragraphs 32(2)(la) and 31(2)(lb) to permit operating standards to be prescribed for the outsourcing arrangements and the adequacy of resources, including human, technical and financial resources, of approved deposit funds.

Item 42

5.125 This item amends subsection 33(1) to permit operating standards to be prescribed for the operation of trustees and RSE licensees of pooled superannuation trusts.

Item 43

5.126 This item inserts paragraph 33(2)(aa) to permit operating standards to be prescribed for the circumstances in which units can be acquired in pooled superannuation trusts.

Item 44

5.127 This item amends paragraph 33(2)(b) to permit operating standards to be prescribed for the management of investments, in addition to the investments themselves, of pooled superannuation trusts.

Item 45

5.128 This item inserts paragraph 33(2)(ba) to permit operating standards to be prescribed for the fitness and propriety of RSE licensees and trustees of pooled superannuation trusts.

Item 46

5.129 This item inserts paragraphs 33(2)(ja) and 31(2)(jb) to permit operating standards to be prescribed for the outsourcing arrangements and the adequacy of resources, including human, technical and financial resources, of pooled superannuation trusts.

Item 47

5.130 A new subsection 63(7A) is inserted to provide an additional rule for funds that do not comply with equal representation rules. The RSE licensee of a fund that is not a public offer fund, while subsection 63(7D) applies to the fund, must not accept any contributions made to the fund by an employer-sponsor. Given that section 63 is the primary means by which APRA enforces the equal representation rules in Part 9 of the SIS Act, the penalty for breaching this requirement is 60 penalty units. Subsection 63(7C) makes breach of this provision an offence of strict liability.

5.131 Subsection 63(7D) applies to a fund while it fails to comply with the basic equal representation rules provided for in subsection 92(4) for funds with more than 4 but fewer than 50 members, or subsection 93(4) for funds with more than 49 members.

Item 48

5.132 Subsection 63(8) is amended by inserting a reference to subsection 63(7B), which provides that a contravention of this subsection does not affect the validity of a contribution. However, where the contribution is accepted in contravention of that subsection, it must be refunded in 28 days, or the period allowed by APRA.

Item 49

5.133 This item corrects the expression in subsection 63(8) to take account of the addition of subsection 63(7B).

Item 50

5.134 This item allows a trustee to meet the alternative agreed representation rule in subsection 92(5) if the trustee is an approved trustee or an RSE licensee.

Item 51

5.135 This item is amended to recognise that the trustee may be an approved trustee or a RSE licensee. It provides that, in the case of an approved trustee, that the trustee meets the alternative representation rule in subsection 92(5) if the trustee's approval specifies that the trustee is also approved for the purposes of this subsection. In the case of an RSE license, the trustee meets the alternative representation rule in subsection 92(5) if one of the conditions imposed on the RSE licensee's RSE licence requires the trustee to ensure that the fund or class of funds complies with the alternative agreed representation rule.

Item 52

5.136 This item clarifies that the subsection 92(9) applies only where the trustee is an approved trustee.

Item 53

5.137 This item makes it clear that the trustee must appoint an approved auditor to give the trustee a report of both the operations of the entity and of the RSE licensee of the entity.

Item 54

5.138 This item amends subsection 113(3)(b) to recognise that a trustee may be an approved trustee or an RSE licensee during the licensing transition period. This amendment requires that the report to the trustee commissioned under subsection 113(1) must contain a written statement by the auditor as to whether the trustee and the RSE licensee (if any) have complied with the Act and the Regulations and the Financial Sector (Collection of Data) Act 2001.

Item 55

5.139 This item amends the approved form of the report that must be given to the trustee of a registrable superannuation entity that is registered under Part 2B by inserting paragraph 113(3)(c). The purpose of this new paragraph is to ensure that the approved auditor's report considers the RSE licensee's compliance with the following:

·
the risk management plan for the entity for the current year and the capacity for compliance in the future; and
·
the risk management strategy for the RSE licensee for the current activities and the capacity for compliance in the future.

Item 56

5.140 This item amends the requirement in subsection 121A(1) in relation to trustees of superannuation funds with fewer than five members (other than self managed superannuation funds). This amendment provides that the trustee of such a fund must be either an approved trustee or an RSE licensee that is a constitutional corporation. The heading to section 121A is altered to reflect this change.

Item 57

5.141 This item repeals subsection 133(1) relating to the suspension or removal of trustees. The new subsection grants the Regulator the power to remove or suspend a trustee in a number of circumstances where there are prudential risks to the fund and/or fund members.

5.142 APRA may suspend or remove a trustee that is a disqualified person within the meaning of Part 15.

5.143 APRA may suspend or remove a trustee where the conduct, or proposed conduct, of any of the trustees of the entity may result in an unsatisfactory financial position for that entity, or any other superannuation entity.

5.144 APRA may suspend or remove a trustee where the approval of that trustee has been revoked under the SIS Act, or the RSE licence of that trustee has been cancelled by APRA.

5.145 If a trustee is subject to the requirement in subsection 121A(1) to be an approved trustee or an RSE licensee that is a constitutional corporation, but fails to fulfil that obligation, the trustee may be removed or suspended.

5.146 APRA may remove or suspend a trustee where that trustee is an RSE licensee that has breached any of the conditions imposed on that RSE license under the new Part 2A of the SIS Act.

Item 58

Part 18 - Amalgamation of funds

5.147 Item 58 inserts into the SIS Act Part 18 concerning amalgamation of funds.

5.148 Section 143 describes the object of Part 18.

5.149 Part 18 is primarily designed to address circumstances where a trustee of a regulated superannuation fund or approved deposit fund has not become an RSE licensee before the end of the licensing transition period. At the end of the transition period, APRA can suspend or remove such a trustee and put in place an RSE licensee as an acting trustee. However, permanent arrangements will need to be made for the entity, and an acting trustee may not be prepared to continue in this capacity.

5.150 Part 18 facilitates the transfer of all members' benefits in a registrable superannuation entity to another entity in certain circumstances. The arrangements contained in Part 18 operate alongside, and are designed to complement, the successor fund arrangements that are contained in the SIS Act.

5.151 Section 144 gives APRA the power to approve the transfer of all benefits of members and beneficiaries in a regulated superannuation fund or approved deposit fund (the transferor fund) to another regulated superannuation fund or approved deposit fund (the transferee fund), providing all of the trustees of the transferor fund are party to the transfer and the trustee of transferee fund is an approved trustee (if the transfer takes place during the licensing transition period) or an RSE licensee. Where the trustee of the transferee fund is an RSE licensee that is a group of individual trustees, all of the individual trustees of the transferee fund must be party to the transfer.

5.152 Section 145 establishes the processes for trustees of transferor funds and transferee funds to make an application to APRA for approval of the transfer of all benefits of members and beneficiaries between the two funds.

5.153 Section 146 establishes the circumstances in which APRA may approve a transfer between a transferor fund and a transferee fund under section 144. APRA must be satisfied that all reasonable attempts to bring about the transfer under another provision of the SIS Act (for example, under the successor fund arrangements) have failed, or the transfer would take place under a scheme for winding up or dissolving the transferor fund under section 142 of the SIS Act. Section 146 also lists factors APRA must have regard for when forming a view that the transfer is reasonable in all circumstances. APRA cannot approve a transfer without first gaining the Minister's written consent to the transfer.

5.154 Section 147 provides that once the benefits of members and beneficiaries in a transferor fund are transferred to a transferee fund, members and beneficiaries and other persons cease respectively to have rights or contingent rights against the transferor fund. This provision is designed to ensure there is a clean break between members and beneficiaries and other persons holding contingent rights against a transferor fund once a transfer has been completed.

Item 59

5.155 This item clarifies that a trustee of a public offer entity must be an approved trustee or an RSE licensee that is a constitutional corporation in order to engage in conduct to which section 152 applies, that is, issuing, offering to issue of inviting applications for the issue of superannuation interests in a public offer entity. This item also codifies the requirement that the approved trustee or the RSE licensee must be the only trustee of that entity.

Item 60

5.156 Item 60 inserts a new section 338A which clarifies the liability of a trustee who is a member of a group of individual trustees where a trustee must ensure that a particular thing occurs. Section 338A ensures that a person is not liable for a failure to ensure that a particular thing occurs if the person has exercised due diligence. This provision is modelled on section 731 of the Corporations Act 2001.

Item 61

5.157 This item makes it clear that only the trustee of a superannuation entity that is affected by a decision of the Regulator to cancel an RSE licence may request that the Regulator reconsider that decision. Subsection 344(12) is amended to provide consistency with the amendment to the definition of 'reviewable decision' in subsection 10(1).

Part 2 - Amendments commencing second

Superannuation Industry (Supervision) Act 1993

Item 62

5.158 Section 4 contains a summary of the provisions of the SIS Act. This item repeals the table item that refers to the approval of trustees because Part 2 of the SIS Act, which contains the provisions relating to the approval of trustees, is repealed under Schedule 1, Part 2, Item 71 of the Bill.

Item 63

5.159 This item makes it clear that the general administration of the provisions inserted in Part 2A and 2B of the SIS Act will be conducted by the APRA. This item also removes the redundant reference to Part 2 of the SIS Act.

Item 64

5.160 This item amends the definition of approved deposit fund in subsection 10(1) to make it clear that the trustee of an approved deposit fund must be licensed under Part 2A of the SIS Act and must be a constitutional corporation.

5.161 This item removes the reference to an approved trustee, as the requirement to seek approval is being replaced by the requirement for the trustee to be licensed. This item also explicitly requires that the trustee of an approved deposit fund be a constitutional corporation, which was implied in the previous definition, as only a constitutional corporation was able to apply to be an approved trustee.

Item 65

5.162 This item repeals the definition of approved trustee in subsection 10(1) because the requirement to seek approval is being replaced by the requirement for trustees or groups of individual trustees to be licensed.

Item 66

5.163 This item removes paragraphs (ba) to (dc) of the definition of reviewable decision in subsection 10(1) as these decisions are made under provisions contained in Part 2 of the SIS Act, which is being repealed under Schedule 1, Part2, Item 71.

Items 67 and 68

5.164 These items amend paragraphs (m) and (n) of the definition of reviewable decision in subsection 10(1) to remove the redundant references to 'a trustee's subsection 92(5) approval'.

Item 69

5.165 This item repeals the definition of written custody requirements, in subsection 10(1) which are requirements that may apply to an approved trustee. This term is no longer used in the SIS Act because the approval of trustees is replaced by the requirement for trustees to be licensed.

Item 70

5.166 This item removes the redundant reference to an approved trustee in paragraph 17A(4)(a).

Item 71

5.167 This item repeals Part 2 of the SIS Act, which contains the provisions relating to the approval of trustees. The references to the approval of trustees are being removed because the requirement to seek approval is being replaced by the requirement for trustees or groups of individual trustees to be licensed, which will be contained in Part 2A of the SIS Act.

Item 72

5.168 This item removes the redundant reference to the licensing transition period in the subsection 29J(1).

Item 73

5.169 This item removes the redundant reference to the operation of the licensing transition period in subsection 29J(1).

Item 74

5.170 This item inserts punctuation consequential to removal of paragraphs (c) and (d) in paragraph 29J(1)(b).

Item 75

5.171 This item removes the transitional arrangements in paragraphs 29J(1)(c), (d) and (e) as the licensing transition period ends immediately before the commencement of this schedule.

Item 76

5.172 This item removes the redundant reference to an approved trustee in paragraph 92(5)(c).

Item 77

5.173 This item removes the redundant reference in paragraph 92(5)(ca) to the instrument of approval under section 26 for an approved trustee.

Item 78

5.174 This item removes the redundant provisions relating to a trustee's approval in subsections 92(6), (7), (8) and (9).

5.175 Subsection 92(6), (7), (8) and (9) relate to APRA and the approval of an alternative agreed representation rule under subsection 92(5). This item repeals those subsections, which relate to the approval of, the attaching of conditions to, and the revocation of approval under the alternative agreed representation rule, as these issues will now be dealt under conditions attaching to the trustee's RSE licence.

Item 79

5.176 This item repeals section 121A to remove the redundant requirement that the trustee of a superannuation fund with fewer than five members (other than a self managed superannuation fund) must be an approved trustee. The requirement to be an approved trustee has been replaced by the requirement for a trustee to be licensed.

Item 80

5.177 This item repeals paragraph 133(1)(c) as the reference to the approval of a trustee is redundant and the reference to the RSE licence is dealt with in the new paragraph.

5.178 This item repeals paragraph 133(1)(d) as the obligation in section 121A has been repealed.

5.179 The new paragraph enables the Regulator to suspend or remove a trustee that is not an RSE licensee or a member of a group of individuals that is an RSE licensee. This power enables the Regulator to prevent persons from acting as a trustee of a superannuation entity where those persons have not been licensed. The purpose of licensing is to ensure that those persons responsible for the management of superannuation funds are capable of fulfilling their legal duties, and this paragraph reinforces the Regulator's ability to enforce the requirement to be licensed.

Item 81

5.180 A new subsection 142(9) is inserted that applies in circumstance where a fund had an approved trustee that failed to obtain an RSE licence during the licensing transition period. The subsection specifies that, in those circumstances, an instrument that formulates a scheme for winding up or dissolution of an entity is not a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Item 82

5.181 This item removes the redundant reference to the approved trustee in subparagraph 144(1)(b)(i).

Item 83

5.182 This item removes the redundant reference to the approved trustee in paragraph 145(1)(a).

Item 84

5.183 This item removes the redundant reference to the approved trustee in paragraph 146(1)(d).

Item 85

5.184 This item removes the redundant reference to an approved trustee in paragraph 152(2A)(a).

Item 86

5.185 This item removes the redundant reference to paragraphs 344(12)(ba), (c) and (d) of the definition of reviewable decision, as these paragraphs were repealed under Schedule 1, Part 2, Item 65 of the Bill.


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