SUPERANNUATION LEGISLATION AMENDMENT (TRUSTEE OBLIGATIONS AND PRUDENTIAL STANDARDS) ACT 2012 (NO. 117, 2012) - SCHEDULE 1 Trustee obligations
SUPERANNUATION LEGISLATION AMENDMENT (TRUSTEE OBLIGATIONS AND PRUDENTIAL STANDARDS) ACT 2012 (NO. 117, 2012) - SCHEDULE 1
Trustee obligations
Superannuation Industry (Supervision) Act 1993
1 Subsection 10(1)
Insert:
"enhanced director obligations" , for MySuper products, means the obligations imposed by:
(a) section 29VO; and
(b) covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced director obligations.
2 Subsection 10(1)
Insert:
"enhanced trustee obligations" , for MySuper products, means the obligations imposed by:
(a) covenants referred to in section 52, as enhanced by the obligations imposed under section 29VN; and
(b) covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced trustee obligations.
3 Subsection 10(1)
Insert:
"superannuation entity director" has the meaning given by subsection 29VO(3).
4 Paragraph 29D(1)(g)
Repeal the paragraph, substitute:
(g) in a case where the application is for a licence of a class that enables a trustee that holds a licence of the class to be a trustee of a public offer entity subject to any condition imposed under subsection 29EA(3)--APRA is satisfied that the applicant is a constitutional corporation; and
5 Section 29DA
Repeal the section.
6 Subsection 29E(3)
Repeal the subsection, substitute:
(3) An additional condition is imposed on each RSE licence that enables a trustee that holds a licence of that class to be a trustee of a public offer entity. The condition is that the RSE licensee that holds the licence must continue to be a constitutional corporation.
7 After paragraph 29T(1)(h)
Insert:
(ha) where the RSE licensee is a body corporate--APRA is satisfied that the directors of the RSE licensee are likely to comply with the enhanced director obligations for MySuper products; and
8 After paragraph 29U(2)(c)
Insert:
(ca) where the RSE licensee is a body corporate--APRA is no longer satisfied that the directors of the RSE licensee are likely to comply with the enhanced director obligations for MySuper products (whether because of a previous failure to do so, or for any other reason); or
9 After Division 5 of Part 2C
Insert:
Division 6 -- Trustee obligations relating to MySuper
29VN Additional obligations of a trustee in relation to a MySuper product
Each trustee of a regulated superannuation fund that includes a MySuper product must:
(a) promote the financial interests of the beneficiaries of the fund who hold the MySuper product, in particular returns to those beneficiaries (after the deduction of fees, costs and taxes); and
(b) determine on an annual basis whether the beneficiaries of the fund who hold the MySuper product are disadvantaged, in comparison to the beneficiaries of other funds who hold a MySuper product within those other funds, because the financial interests of the beneficiaries of the fund who hold the MySuper product are affected:
(i) because the number of beneficiaries of the fund who hold the MySuper product is insufficient; or
(ii) because the number of beneficiaries of the fund is insufficient; or
(iii) where the assets of the fund that are attributed to the MySuper product are, or are to be, pooled with other assets of the fund or assets of another entity or other entities--because that pool of assets is insufficient; or
(iv) in a case to which subparagraph (iii) does not apply--because the assets of the fund that are attributed to the MySuper product are insufficient; and
(c) include in the investment strategy for the MySuper product the details of the trustee's determination of the matters mentioned in paragraph (b); and
(d) include in the investment strategy for the MySuper product, and update each year:
(i) the investment return target over a period of 10 years for the assets of the fund that are attributed to the MySuper product; and
(ii) the level of risk appropriate to the investment of those assets.
29VO Additional obligations of a director of a corporate trustee in relation to a MySuper product
(1) Each director of a corporate trustee of a regulated superannuation fund that includes a MySuper product must exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the obligations referred to in section 29VN.
(2) The reference in subsection (1) to a reasonable degree of care and diligence is a reference to the degree of care and diligence that a superannuation entity director would exercise in the corporate trustee's circumstances.
(3) A superannuation entity director is a person whose profession, business or employment is or includes acting as director of a corporate trustee of a superannuation entity and investing money on behalf of beneficiaries of the superannuation entity.
29VP Contravention of section 29VN or 29VO
(1) A person must not contravene section 29VN or 29VO.
(2) A contravention of subsection (1) is not an offence and a contravention of that subsection does not result in the invalidity of a transaction.
(3) A person who suffers loss or damage as a result of the conduct of another person that was engaged in in contravention of subsection (1) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
(4) An action under subsection (3) may be begun at any time within 6 years after the day on which the cause of action arose.
A provision of the governing rules of a regulated superannuation fund is void to the extent that it is inconsistent with:
(a) the obligations that apply to a trustee of the fund under section 29VN; or
(b) if the trustee of the fund is a body corporate--the obligations that apply to the directors of the body corporate under section 29VO.
10 Division 6 of Part 2C
Repeal the heading, substitute:
11 After section 51
Insert:
To avoid doubt, each covenant referred to in sections 52 to 53 or prescribed under section 54A, and each obligation referred to in sections 29VN and 29VO, that applies to a trustee of a superannuation entity, or a director of a corporate trustee of a superannuation entity, applies in addition to every other covenant or obligation referred to in those sections that applies to the trustee or director.
12 Section 52
Repeal the section, substitute:
52 Covenants to be included in governing rules--registrable superannuation entities
Governing rules taken to contain covenants
(1) If the governing rules of a registrable superannuation entity do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect.
General covenants
(2) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to act honestly in all matters concerning the entity;
(b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments;
(c) to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries;
(d) where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee:
(i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and
(ii) to ensure that the duties to the beneficiaries are met despite the conflict; and
(iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and
(iv) to comply with the prudential standards in relation to conflicts;
(e) to act fairly in dealing with classes of beneficiaries within the entity;
(f) to act fairly in dealing with beneficiaries within a class;
(g) to keep the money and other assets of the entity separate from any money and assets, respectively:
(i) that are held by the trustee personally; or
(ii) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the entity;
(h) not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee's functions and powers;
(i) if there are any reserves of the entity--to formulate, review regularly and give effect to a strategy for their prudential management, consistent with the entity's investment strategies and its capacity to discharge its liabilities (whether actual or contingent) as and when they fall due;
(j) to allow a beneficiary of the entity access to any prescribed information or any prescribed documents.
Superannuation trustee
(3) In paragraph (2)(b), a superannuation trustee is a person whose profession, business or employment is or includes acting as a trustee of a superannuation entity and investing money on behalf of beneficiaries of the superannuation entity.
Obligations to beneficiaries override obligations under certain other Acts
(4) The obligations of the trustee under paragraph (2)(d) override any conflicting obligations an executive officer or employee of the trustee has under:
(a) Part 2D.1 of the Corporations Act 2001 ; or
(b) Division 4 of Part 3 of the Commonwealth Authorities and Companies Act 1997 .
Trustee not prevented from engaging or authorising persons to act on trustee's behalf
(5) A covenant referred to in paragraph (2)(h) does not prevent the trustee from engaging or authorising persons to do acts or things on behalf of the trustee.
Investment covenants
(6) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to an investment strategy for the whole of the entity, and for each investment option offered by the trustee in the entity, having regard to:
(i) the risk involved in making, holding and realising, and the likely return from, the investments covered by the strategy, having regard to the trustee's objectives in relation to the strategy and to the expected cash flow requirements in relation to the entity; and
(ii) the composition of the investments covered by the strategy, including the extent to which the investments are diverse or involve the entity in being exposed to risks from inadequate diversification; and
(iii) the liquidity of the investments covered by the strategy, having regard to the expected cash flow requirements in relation to the entity; and
(iv) whether reliable valuation information is available in relation to the investments covered by the strategy; and
(v) the ability of the entity to discharge its existing and prospective liabilities; and
(vi) the expected tax consequences for the entity in relation to the investments covered by the strategy; and
(vii) the costs that might be incurred by the entity in relation to the investments covered by the strategy; and
(viii) any other relevant matters;
(b) to exercise due diligence in developing, offering and reviewing regularly each investment option;
(c) to ensure the investment options offered to each beneficiary allow adequate diversification.
Insurance covenants
(7) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to an insurance strategy for the benefit of beneficiaries of the entity that includes provisions addressing each of the following matters:
(i) the kinds of insurance that are to be offered to, or acquired for the benefit of, beneficiaries;
(ii) the level, or levels, of insurance cover to be offered to, or acquired for the benefit of, beneficiaries;
(iii) the basis for the decision to offer or acquire insurance of those kinds, with cover at that level or levels, having regard to the demographic composition of the beneficiaries of the entity;
(iv) the method by which the insurer is, or the insurers are, to be determined;
(b) to consider the cost to all beneficiaries of offering or acquiring insurance of a particular kind, or at a particular level;
(c) to only offer or acquire insurance of a particular kind, or at a particular level, if the cost of the insurance does not inappropriately erode the retirement income of beneficiaries;
(d) to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the claim has a reasonable prospect of success.
Covenants relating to risk
(8) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to a risk management strategy that relates to:
(i) the activities, or proposed activities, of the trustee, to the extent that they are relevant to the exercise of the trustee's powers, or the performance of the trustee's duties and functions, as trustee of the entity; and
(ii) the risks that arise in operating the entity;
(b) to maintain and manage in accordance with the prudential standards financial resources (whether capital of the trustee, a reserve of the entity or both) to cover the operational risk that relates to the entity.
Governing rules taken to contain covenants
(1) If the governing rules of a registrable superannuation entity of which a trustee is a body corporate do not contain covenants to the effect of the covenants set out in subsection (2), those governing rules are taken to contain covenants to that effect.
The covenants
(2) The covenants referred to in subsection (1) are the following covenants by each director of a corporate trustee of the entity:
(a) to act honestly in all matters concerning the entity;
(b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation entity director would exercise in relation to an entity where he or she is a director of the trustee of the entity and that trustee makes investments on behalf of the entity's beneficiaries;
(c) to perform the director's duties and exercise the director's powers as director of the corporate trustee in the best interests of the beneficiaries;
(d) where there is a conflict between the duties of the director to the beneficiaries, or the interests of the beneficiaries, and the duties of the director to any other person or the interests of the director, the corporate trustee or an associate of the director or corporate trustee:
(i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and
(ii) to ensure that the duties to the beneficiaries are met despite the conflict; and
(iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and
(iv) to comply with the prudential standards in relation to conflicts;
(e) not to enter into any contract, or do anything else, that would:
(i) prevent the director from, or hinder the director in, properly performing or exercising the director's functions and powers as director of the corporate trustee; or
(ii) prevent the corporate trustee from, or hinder the corporate trustee in, properly performing or exercising the corporate trustee's functions and powers as trustee of the entity;
(f) to exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the covenants referred to in section 52.
Obligations to beneficiaries override obligations under certain other Acts
(3) The obligations of the director under paragraph (2)(d) override any conflicting obligations the director has under:
(a) Part 2D.1 of the Corporations Act 2001 ; or
(b) Division 4 of Part 3 of the Commonwealth Authorities and Companies Act 1997 .
Director not prevented from engaging or authorising persons to act on behalf of the trustee
(4) A covenant referred to in paragraph (2)(e) does not prevent the director from engaging or authorising persons to do acts or things on behalf of the trustee.
Using reasonable care and diligence to ensure compliance by corporate trustee
(5) The reference in paragraph (2)(f) to a reasonable degree of care and diligence is a reference to the degree of care and diligence that a superannuation entity director would exercise in the circumstances of the corporate trustee.
Covenants operate as if director party to the governing rules
(6) A covenant referred to in subsection (2) operates as if the director were a party to the governing rules.
52B Covenants to be included in governing rules--self managed superannuation funds
Governing rules taken to contain covenants
(1) If the governing rules of a self managed superannuation fund do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect.
The covenants
(2) The covenants referred to in subsection (1) are the following covenants by each trustee of the fund:
(a) to act honestly in all matters concerning the fund;
(b) to exercise, in relation to all matters affecting the fund, the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide;
(c) to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries;
(d) to keep the money and other assets of the fund separate from any money and assets, respectively:
(i) that are held by the trustee personally; or
(ii) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund;
(e) not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee's functions and powers;
(f) to formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the fund including, but not limited to, the following:
(i) the risk involved in making, holding and realising, and the likely return from, the fund's investments, having regard to its objectives and its expected cash flow requirements;
(ii) the composition of the fund's investments as a whole including the extent to which the investments are diverse or involve the fund in being exposed to risks from inadequate diversification;
(iii) the liquidity of the fund's investments, having regard to its expected cash flow requirements;
(iv) the ability of the fund to discharge its existing and prospective liabilities;
(g) if there are any reserves of the fund--to formulate, review regularly and give effect to a strategy for their prudential management, consistent with the fund's investment strategy and its capacity to discharge its liabilities (whether actual or contingent) as and when they fall due;
(h) to allow a beneficiary of the fund access to any prescribed information or any prescribed documents.
Trustee not prevented from engaging or authorising persons to act on trustee's behalf
(3) A covenant referred to in paragraph (2)(e) does not prevent the trustee from engaging or authorising persons to do acts or things on behalf of the trustee.
Covenant referred to in paragraph (2)(f)
(4) An investment strategy is taken to be in accordance with paragraph (2)(f) even if it provides for a specified beneficiary or a specified class of beneficiaries to give directions to the trustee, where:
(a) the directions relate to the strategy to be followed by the trustee in relation to the investment of a particular asset or assets of the fund; and
(b) the directions are given in circumstances prescribed by regulations made for the purposes of this paragraph.
Governing rules taken to contain covenant
(1) If the governing rules of a self managed superannuation fund of which a trustee is a body corporate do not contain a covenant to the effect of the covenant set out in subsection (2), those governing rules are taken to contain a covenant to that effect.
The covenant
(2) The covenant referred to in subsection (1) is a covenant by each director of a corporate trustee of the fund to exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the covenants referred to in section 52B.
Reasonable degree of care and diligence
(3) The reference in subsection (2) to a reasonable degree of care and diligence is a reference to the degree of care and diligence that a reasonable person in the position of director of the corporate trustee would exercise in the corporate trustee's circumstances.
Covenant operates as if director party to the governing rules
(4) The covenant referred to in subsection (2) operates as if the director were a party to the governing rules.
13 After section 54
Insert:
54A Regulations may prescribe other covenants
(1) The regulations may prescribe a covenant to be included in the governing rules of a superannuation entity and, if the governing rules of such a superannuation entity do not contain a covenant to the effect of the prescribed covenant, those rules are taken to contain a covenant to that effect.
Prescribed covenants may deal with same matters as other requirements
(2) Without limiting the generality of subsection (1), the regulations may prescribe, for the purposes of that subsection, a covenant that elaborates, supplements, or otherwise deals with, any aspect of:
(a) a matter to which a covenant in sections 52 to 53 relates; or
(b) a matter to which a provision of this Act relates.
But prescribed covenants must be capable of operating concurrently with other requirements
(3) However, a covenant prescribed under subsection (1) must be capable of operating concurrently with:
(a) all the covenants referred to in sections 52 to 53; and
(b) this Act.
(4) The regulations may specify that a covenant prescribed under subsection (1) is to form part of the enhanced trustee obligations, or the enhanced director obligations.
14 Subsections 55(5) and (6)
Repeal the subsections, substitute:
(5) It is a defence to an action for loss or damage suffered by a person as a result of the making of an investment by or on behalf of a trustee of a superannuation entity if the defendant establishes that the defendant has complied with all of the covenants referred to in sections 52 to 53 and prescribed under section 54A, and all of the obligations referred to in sections 29VN and 29VO, that apply to the defendant in relation to the investment.
(6) It is a defence to an action for loss or damage suffered by a person as a result of the management of any reserves by a trustee of a superannuation entity if the defendant establishes that the defendant has complied with all of the covenants referred to in sections 52 to 53 and prescribed under section 54A, and all of the obligations referred to in sections 29VN and 29VO, that apply to the defendant in relation to the management of the reserve.
15 Subsection 55(7)
After "under subsection (3)", insert ", section 29VP".
16 Subsection 56(1)
Omit "A provision", substitute "Subject to subsections (2) and (2A), a provision".
17 Paragraph 56(1)(b)
Omit "subject to subsection (2),".
18 After subsection 56(2)
Insert:
(2A) A provision in the governing rules of a registrable superannuation entity is void in so far as it would have the effect of allowing a trustee of the entity:
(a) to indemnify itself out of the assets of the entity for any amount expended out of capital of the trustee managed and maintained by the trustee to cover the operational risk of the entity; or
(b) to indemnify itself out of any assets of the entity that do not form part of a reserve maintained for the purpose of covering the operational risk relating to the entity, any amount that relates to that risk, without first exhausting the reserve and any other financial resources managed and maintained by the trustee to cover the risk.
19 Paragraph 58(2)(d)
Repeal the paragraph, substitute:
(d) a direction given by a beneficiary to take up, dispose of or alter the amount invested in an investment option, where:
(i) the entity is a registrable superannuation entity; and
(ii) the direction is given in circumstances prescribed by the regulations for the purposes of this paragraph; or
20 Section 115
Repeal the section, substitute:
115 Trustee of superannuation entity may maintain reserves
(1) The trustee of a superannuation entity may maintain a reserve of the entity for a particular purpose, unless the governing rules of the entity prohibit the maintenance of a reserve for that purpose.
Governing rules of an RSE must not prohibit reserves to cover operational risk
(2) The governing rules of a registrable superannuation entity must not prohibit the maintenance of a reserve to cover the operational risk relating to the entity.
(3) If the governing rules of a registrable superannuation entity are inconsistent with subsection (2):
(a) subsection (2) prevails; and
(b) the governing rules are invalid, to the extent of the inconsistency.