While acknowledging the high volume of change in superannuation, ASIC, as conduct regulators for superannuation, continues to expect trustees to approach their regulatory obligations with responsibility, accountability, and transparency. Looking ahead to 2021-22, JANE ECCLESTON, Senior Executive Leader, Superannuation, ASIC identifies ASIC’s main priorities.
One of ASIC’s key priorities in the 2020–21 financial year was delivering as the conduct regulator for superannuation. This involved implementing law reforms expanding ASIC’s role, and prioritising misconduct relating to superannuation in our enforcement work.
To guide our work in 2021–22, ASIC released a new Corporate Plan in which we identified four priorities:
For the superannuation industry, this means in 2021–22, ASIC as conduct regulator will focus on (2) reducing the risk of harm to consumers. We will also help (4) drive industry readiness and compliance with standards set by law reform. The Your Future, Your Super (YFYS) reforms are a key development for the industry. Superannuation trustees are also affected by more general changes to financial services regulation. This includes the design and distribution obligations (DDOs), new internal dispute resolution (IDR) standards, anti-hawking measures and changes to breach reporting requirements, all of which took effect in early October. On the horizon is the retirement income covenant.
ASIC acknowledges there is a lot of change. What this means for superannuation trustees is that ASIC is taking into account the context in which firms are currently operating. ASIC Chair Joe Longo recently stated that during the early stages of the October reforms, ASIC will take a reasonable approach to enforcement, provided trustees are using their best efforts to comply.
ASIC’s ‘reasonable approach to enforcement’ extends to technical or inadvertent breaches of the October reforms, where trustees have systems changes underway and they act quickly to address problems that arise. However, where trustees are found to not be acting in good faith, or we detect conduct causing actual harm to consumers, ASIC will not hesitate to enforce the law.
ASIC also expects trustees to approach their regulatory obligations through a lens of responsibility, accountability, and transparency. Good intentions are not enough to meet the standard of conduct required of trustees. ASIC expects trustees to take responsibility for how their decisions can affect consumers in practice. We are undertaking various regulatory initiatives on increased transparency and scrutiny of trustees.
ASIC maps its upcoming projects in superannuation against external priorities in the Corporate Plan. Three project areas of particular interest to trustees in the 2021–22 financial year include:
We’ll look at each of these in turn.
To monitor the superannuation industry’s implementation of YFYS reforms, ASIC is conducting a surveillance of trustees’ communications to their members. We are looking at performance test failure notifications and other disclosures that funds send to members, and disclosures made by a sample of funds that passed the test.
We are also looking at statements made by funds about the results of the test, which may confuse or mislead consumers. In undertaking this surveillance, our objectives are to ensure:
In the last financial year, ASIC began work on IDR in superannuation and took steps to support industry’s transition to RG 271 Internal dispute resolution, which took effect on 5 October. We plan to continue this work in 2021–22.
In September, we released findings from our survey of superannuation trustees on preparedness for the new enforceable IDR obligations and identified five areas as requiring more work from trustees. These included:
Upon this release, Commissioner Danielle Press reiterated ASIC’s call for all trustees to assess their preparedness in light of the fact that, from 5 October, more extensive enforceable IDR requirements apply. Trustees should also assess their approach to IDR as an indicator of their overall fund culture and ensure they are delivering and assessing IDR in a member-centric way.
In 2022, ASIC plans to undertake a surveillance of trustees on their compliance with the enforceable RG 271 requirements. As part of this surveillance, we will analyse data and review case studies. This will enable us to assess industry compliance and determine if further regulatory action is necessary.
The DDOs, changes to hawking rules and ‘stapling’ reforms are all changing the way superannuation trustees think about distribution.
The DDOs came into force on 5 October. Product issuers are required to design products that meet consumer needs, and to use distribution channels that will get those products to the right consumers. DDOs shift the responsibility for consumer outcomes to the supply side, and ASIC expects trustees to take accountability in ensuring consumers receive suitable products.
In relation to the hawking changes, trustees must ensure they are not offering financial products to retail clients during unsolicited, real-time contact.
The stapling reform that took effect on 1 November will change the way superannuation products are distributed through employers. Technical amendments mean that employers’ ability to deliver on their Superannuation obligations are not impacted by the reforms. But trustees should not underestimate the regulatory limitations on employers being involved in the active distribution of superannuation products (see 21-272MR). We will be doing a review of trustees’ use of the employer distribution channel. This will involve a sample review of trustee practices and, if necessary, action if we identify misconduct resulting in consumer harm.
During the 2021–22 financial year, ASIC will continue to support and monitor the superannuation industry’s implementation of the distribution reforms. We will continue to engage with industry, monitor compliance and provide further communications where necessary.
We are also continuing our regular work in relation to marketing by trustees. This includes regular proactive reviews of trustees’ advertising in broadcast, print, digital and social media as well as the content on trustees’ websites. We have been engaging with trustees on a regular basis in relation to potentially misleading or deceptive conduct as well as other related disclosure obligations.
While ASIC does not review all advertising by trustees, in 2021 alone so far we reviewed over 7,000 individual pieces of advertising. This has resulted in changes to the websites and advertising of nine trustees.
We are also looking at the marketing of superannuation funds that have ‘green’ or ESG (Environmental, Social and Governance) focused products, particularly whether there is a risk of ‘greenwashing’ or unreliable and overstated claims about sustainability.
During the last financial year, ASIC reviewed whistleblower policies from a sample of regulated entities, including trustees. We were concerned to find that many policies did not include important information about how to make a qualifying disclosure, including to whom. Some policies did not include important information about the legal rights and protections for whistleblowers. We expect trustees to consider the information we have published about our observations, and to consider whether any of the issues we have observed are relevant to their entity’s policy. If they are, we expect trustees to address them. ASIC will also continue to monitor compliance with the whistleblower policy requirement and entities’ handling of whistleblower disclosures.
On superannuation calculators and retirement estimate projection tools, we have released a consultation paper and draft legislative instrument. We want to hear from trustees and other stakeholders about how we can update our relief to best facilitate the provision of tools that can help consumers think about how superannuation can be part of their retirement income. We also want to give clarity to trustees about how they can use calculators and retirement estimate projection tools as part of their retirement income strategies under the Government’s proposed retirement income covenant.
And finally, on insurance in superannuation, we will continue to monitor industry’s progress on addressing the issues we have raised in recent years. This includes looking at how trustees are monitoring member outcomes and value for money, and how they are using these insights to refine their insurance arrangements and practices. We will also be looking at what changes trustees are making in response to the new design and distribution obligations, claims handling obligations and other recent reforms.
For more details on our priorities relating to conduct regulation of the superannuation industry, read the ASIC Corporate Plan 2021–25.