The key industry superannuation funds are continuing to reject the Government’s proposed legislative changes to governance arrangements and are citing legal advice that the moves represent over-reach.
The industry funds’ rejection is coming despite the Government agreeing to a number of amendments to the exposure draft legislation, including greater clarity around independent chairs being drawn from the one-third independent directors.
However the legal analysis being utilised by the industry funds claims the Australian Prudential Regulation Authority (APRA) is already equipped with necessary powers and may be given over-reach on issues of independence which should be left to the Government.
A short paper prepared by Hall and Wilcox Lawyers, for the Australian Institute of Superannuation Trustees, claimed that the Australian Prudential Regulation Authority (APRA) was already equipped under the Superannuation Industry (Supervision) Act (SIS) and prudential standards to oversee super fund boards and would be required to make judgements outside its current remit.
The paper stated that when considering the stated objectives of the Government around fund governance and independence compared with the current requirements under SIS and prudential standards “it is difficult to identify existing gaps or areas where APRA does not already have significant powers to step in if it identifies an issue of concern”.
Hall and Wilcox also stated that, under the proposed changes, APRA would be required to determine if a board director was independent with no criteria described as to how that would be measured and could make decisions around independence criteria through Prudential Standard, effectively bypassing Federal Parliament.
Industry Super Australia (ISA) has cited the paper as showing any changes to governance provisions were unnecessary with ISA chief executive David Whiteley questioning what the Federal Government was trying to achieve with the proposed changes.
“This legal advice raises doubt about the rationale behind the government’s proposed changes and reinforces the view that the changes are a solution in search of a problem,” Whiteley said.
He stated the estimated cost of any changes would be around $178 million for not for profit super funds and would be borne by fund members despite “very clear obligations for directors are already set out in current superannuation legislation and in legally binding Prudential Standards”.
“The question is what problem is the government trying to fix?” Whiteley said.
However the Financial Services Council (FSC) has thrown its support behind draft legislation released by the Assistant Treasurer, Josh Frydenberg, stating governance reform would raise standards and boost competition across the wider superannuation industry.
FSC chief executive Sally Loane said the changes would benefit all super funds and “did not single out any one fund type, but are actually designed to improve governance across the $1.4 trillion APRA-regulated sector”.
“With the changes, Australian consumers can have more certainty that the entity managing their retirement savings has the highest standard of governance regardless of whether it is a retail, industry, public sector or corporate fund,” Loane said.
“In a mandatory super system, consumers are entitled to the highest standards of governance.”
