The Australian Securities and Investments Commission (ASIC) is facing questioning over why worker entitlement funds run by trade union entities are not subject to the same regulatory requirements that apply to managed investment schemes and financial products under the Corporations Act.
The questions are being asked on the back of a number of submissions to the Senate Education and Employment Legislation Committee’s inquiry into the Fair Work Laws Amendment (Proper Use of Workers Benefits Bill), including a submission from the Attorney General’s department.
The Attorney-General’s Department submission pointed out that the Heydon Royal Commission had uncovered numerous examples of inappropriate conduct relating to worker entitlement funds.
It said that due to a 2001 ASIC Class Order, worker entitlement funds were currently exempt from the regulatory requirements that apply to managed investment schemes and financial products under the Corporations Act.
“By contrast, under the Corporations Act other managed investment schemes must:
- Have a compliance plan, which sets out how the scheme will operate to comply with its constitution and the Corporations Act;
- Have an external compliance committee or, alternatively, a board at least half of which
- Must be external directors, who monitor the scheme’s compliance with the law;
- Notify ASIC of certain events such as changes to the financial position of the licensee; and
- Provide a Product Disclosure Statement.
The submission said worker entitlement funds are also currently subject to minimal indirect regulation through the FBTA Act and that if the fund chose to become an ‘approved’ fund, contributions from employers to the fund were exempt from fringe benefits tax.
Importantly, the Attorney General’s department submission urged that ASIC should not be the body nominated to regulate worker entitlement funds and suggested that the job should go to the Registered Organisations Commission set up in the wake of the Heydon Royal Commission.