Insurance and superannuation industry watchdog, the Australian Prudential Regulation Authority (APRA), can not adequately oversee government endorsed super funds, according to chief executive Graeme Thompson.
Speaking on the 7:30 Report on the ABC last night, Thompson said APRA had to cover too many funds and could not work to standards expected by the public.
“Given the number of funds that we are responsible for, particularly small to medium sized funds, it’s difficult for us to effectively and intensively supervise that sector as the community has the right to expect,” Thompson said.
One of the best known recent examples of the failure of a fund was the APRA endorsed trustee Commercial Nominees of Australia Limited(CNAL).
CNAL lost millions of dollars of investors’ money despite an APRA investigation and subsequent warnings. The fund was designed as a secure cashbox but monies from the fund were directed to investments in a mushroom farm and retirement village that eventually failed.
According to the watchdog, CNAL had not been risk-rated before the problems were raised and no on-site investigations had taken place throughout 1999 and early 2000.
The comments came on the same day APRA told a senate committee that it wanted more power to keep track of Australia’s 3000 superannuation funds.
APRA executive general manager Les Phelps said the watch dog wanted more information about superannuation funds which were required to report to the authority on an annual basis.
Phelps compared this with credit unions who report to APRA every three months and said that credit unions had to supply much more detailed information than superannuation funds.
Since APRA’s responsibilities included covering superannuation funds, Phelps said it was important that the regulator had access to more comprehensive information about the operation of superannuation funds.
“What we’re thinking is if we can get better information from these superannuation funds, we would have a better chance of picking those ones we would have to target,” he said.
The number of superannuation funds in Australia supervised by APRA has been drastically reduced in recent years from 200,000 to 3000 after a series of tax law changes that saw responsibility for self managed funds being switched to the Australian Tax Office (ATO).
Phelps said that when the numbers were high it was impossible to collect and analyse information about that many funds but with the reduced numbers the regulator should be given a wider scope to examine the performance and risk of funds.
He also said changes to laws governing the way it regulates superannuation funds would need to take place otherwise it would only be able to conduct an in-depth investigation into some funds every five years.
