ASIC puts super fund trustees on notice

 

On 4 July 2017 ASIC Deputy Chairman, Peter Kell, released details of ASIC’s review of superannuation trustees’ attention to their obligations in respect of “Transparency Information” (TI).

 

TI comprises remuneration, governance and other information related to the fund like, for example:

 

• trustee directors’ remuneration for the last two financial years,

 

• fund trust deeds and product disclosure statements,

 

• a summary of significant event notices sent to fund members in the last two years, and

 

• a summary of how the trustee voted in the last financial year in relation to listed shares held by the fund, among other things.

 

The Superannuation Industry (Supervision) Act 1993 (SIS Act) requires superannuation fund trustees to disclose TI on a website and keep it up to date at all times.

 

ASIC has a broad focus on ensuring trustees deliver transparent and accessible information about the superannuation fund and its managers.

 

ASIC identified TI deficiencies in 21 super funds that represented approximately 8% of APRA-regulated funds that are not small APRA funds.

The transparency deficiencies identified in ASIC’s review comprised:

• no super fund website (10 funds)

 

• no TI on the fund website (four funds)

 

• no remuneration information (five funds), and

 

• remuneration disclosed in bands, rather than for each individual executive officer (two funds).

 

These were not necessarily small funds as two of the funds had assets in excess of $10bn. See ASIC’s review outcomes HERE.

 

Given the recent controversy re CPA’s remuneration disclosures (see HERE), the absence of transparency required of large superannuation funds is concerning.

 

What should super fund trustees be doing?

 

This ASIC review serves to focus trustees thinking on their remuneration and governance processes and procedures. Directors of super fund trustees who are not also directors of ASX-listed companies probably have extensive catching up to do. More media attention on superannuation fund remuneration disclosures is bound to arise in coming years. With that will be questions of governance. Many funds, for example, have quite arcane and potentially conflicted methods of determining director and executive KMP remuneration that are bound to come out into the open at some stage. Even if they remain largely under the rug, APRA may eventually come show some supervisory heft to ensure appropriate governance. At the very least, the large superannuation funds will probably need to consider and disclose a remuneration policy justifying the absence of long term (or any) incentive structures when they require same for ASX listed companies. There are reasons for differentiation of super fund remuneration policies from ASX listed companies, but there is a question as to the extent and readiness of super funds ability to adequately articulate the reasons. And, of course, there are those super funds where there is truly poor remuneration policy that lacks consistency, rigour or purpose.

 

There is a range of fundamental questions they can ask of themselves and the board to assist in understanding the level of sophistication of their own fund and the extent to which its governance is defensible. Our article in this month’s releases on remuneration and governance in unlisted organisations provides a good start (see HERE).

 

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