Second Reading SpeechMr Pearce (Parliamentary Secretary to the Treasurer)
That this bill be now read a second time.
This bill introduces measures to streamline and simplify prudential regulation of the financial sector and builds on the government's efforts to cut red tape.
This bill also amends part 23 of the Superannuation Industry (Supervision) Act 1993-otherwise known as the SIS Act-so that financial assistance, where the fund has suffered loss as a result of fraudulent conduct or theft, is available on a more equitable basis. It also makes technical amendments that are consequential on the enactment of the Legislative Instruments Act 2003.
Streamlining prudential regulation
Schedule 1 to this bill amends the Banking Act 1959, the Insurance Act 1973, the Life Insurance Act 1995-the Life Act, the SIS Act 1995-collectively known as the four prudential acts-and the Corporations Act 2001-the Corporations Act-to implement the government commitments relating to prudential regulation in response to Rethinking regulation, the report of the Taskforce on Reducing Regulation Burdens on Business, otherwise known the Regulation Taskforce.
It also includes measures to streamline and simplify the prudential acts in a manner that is consistent with the Regulation Taskforce's findings.
Rethinking regulation found that 'Australia's financial and corporate sectors, and the associated regulatory structures, are highly regarded internationally' and that the 'broad policy framework has widespread support within business and the wider community in Australia'.
However, Rethinking regulation also noted that there is scope to improve the regulatory framework in some areas.
The government accepted all the recommendations in Rethinking regulation relevant to prudential regulation. Most of those recommendations which require legislative amendment have been included as measures in this bill.
There is support within the industry for these measures. These measures have been subject to extensive consultation through the release of a proposals paper, an exposure draft of the bill and an industry roundtable discussion on the draft bill.
The government has listened to industry and as a result of the consultation process, amendments requiring trustees to ensure that investment managers and custodians meet fit and proper criteria have been removed from the bill.
Also as a result of consultation, registrable superannuation entity licensees and superannuation entities now have 12 months from the date of royal assent to display an Australian business number on certain documents.
The prudential acts administered by APRA and related legislation, such as the Corporations Act, have often evolved separately and in response to industry developments, and there is scope to refine and update the four prudential acts to make them more consistent.
Recommendation 5.8 of Rethinking regulation highlighted breach reporting as a particular area where the government should seek to improve consistency and reduce the compliance burden.
Consistent with this recommendation, this bill includes measures to streamline and improve breach reporting, including:
- that only significant breaches need to be reported under the prudential acts;
- harmonised timing requirements under the prudential acts and the Corporations Act for the reporting of breaches so that significant breaches will generally have to be reported to APRA as soon as practicable and, in any event, no later than 10 business days after the entity becomes aware of the breach;
- streamlined breach reporting requirements so that where an actuary or auditor identifies a breach and is required to notify APRA and the regulated entity of the breach, the entity is not required to also report the breach to APRA. The reverse also applies; and
- where a breach is currently required to be reported to APRA and ASIC, that the breach will only need to be reported to APRA. APRA will have arrangements in place to pass the information on to ASIC.
These changes to breach reporting will reduce costs, duplication and effort for the financial sector.
Recommendation 5.4 of Rethinking regulation stated that the government should ensure that APRA has sufficient flexibility to tailor requirements to accommodate differing circumstances.
This bill will provide APRA with greater flexibility to exercise discretion under prudential standards and allow APRA to exempt a person or class of persons from parts of the prudential acts so that entities are not unnecessarily burdened by requirements not appropriate to their situations.
This bill also includes measures to simplify legislation, remove unnecessary regulation and ensure the prudential regime is flexible, consistent and transparent. In particular, the measures relating to the Life Act will repeal around one-third of the sections under the Life Act, greatly streamlining this act.
Part 23 of the SIS Act enables the trustee of a superannuation fund to apply for a grant of financial assistance where the fund has suffered loss as a result of fraudulent conduct or theft.
Following on from a review into the operations of part 23, a number of amendments to the SIS Act are being made in schedule 2 of this bill so that financial assistance is available on a more equitable basis.
The amendments include:
- removing the differences between the treatment of accumulation and defined benefit funds;
- allowing former beneficiaries to obtain financial assistance under part 23;
- allowing funds which were eligible for part 23 assistance at the time the loss was suffered, but which subsequently restructured into self-managed superannuation funds, to obtain financial assistance; and
- streamlining the part 23 application process.
These amendments will ensure that financial assistance under part 23 of the SIS Act is available on a more equitable basis and will enhance the operation of the part 23 application process.
Accounting and reporting obligations
As part of the streamlining prudential regulation reforms, Schedule 3 to this bill amends the SIS Act, the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987 and the Income Tax Assessment Act 1936, to:
- consolidate and rationalise the prudential reporting requirements under the SIS Act;
- distinguish between reporting requirements relating to registrable superannuation entities and self- managed superannuation funds; and
- remove the regulatory gap that exists in the SIS Act for the reporting of contraventions of the market conduct and disclosure provisions in the Corporations Act.
The consolidation and rationalisation of the prudential reporting requirements in the SIS Act aims to ensure ease of compliance by superannuation entities. This assists the regulator in its prudential supervisory activities and promotes confidence that the entities providing superannuation services are prudently managed.
Technical amendments relating to legislative instruments
Schedule 4 amends various legislation, including the prudential acts, to make technical amendments that are consequential on the enactment of the Legislative Instruments Act 2003.
These amendments do not in any way affect the operation of the legislation.
The measures in this bill address many of the concerns of the financial services sector by removing regulatory overlaps, providing greater flexibility for APRA to tailor prudential requirements to particular circumstances and removing unnecessary or outdated provisions.
Full details of the amendments are contained in the explanatory memorandum. I commend the bill to the House.
Debate (on motion by Ms Plibersek) adjourned.