Explanatory Memorandum
(Circulated by authority of the Treasurer, the Honourable Peter Costello MP)20 Schedule 16: Amendment of the Superannuation Industry (Supervision) Act 1993
The purpose of Schedule 16 is to amend the Superannuation Industry (Supervision) Act 1993 (the Act) so as to separate responsibility for the administration of the Act between ASIC and APRA. All of the functions and powers under the Act were formerly performed and exercised by the Insurance and Superannuation Commissioner. Consistent with the amendments of the Retirement Savings Accounts Act 1997 and the Life Insurance Act 1995, ASIC will take on responsibility for market integrity and consumer protection functions under the Act, and APRA will have responsibility for the prudential supervision of superannuation entities.
Commencement
20.1 Parts 1 - 6 of Schedule 16 (comprising items 1 - 222) will commence on the commencement of the proposed Australian Prudential Regulation Authority Act 1998.
Part 7 commencement
20.2 In the event that Part 1 of Schedule 2 to the proposed Superannuation Legislation Amendment Act 1998 commences before the proposed Australian Prudential Regulation Authority Act commences, Part 7 of Schedule 16 comes into effect at the time of the commencement of the proposed Australian Prudential Regulation Authority Act.
20.3 In the event that Part 1 of Schedule 2 to the proposed Superannuation Legislation Amendment Act 1998 commences after or at the same time as the proposed Australian Prudential Regulation Authority Act, Part 7 of Schedule 16 comes into effect immediately after the commencement of Part 1 of Schedule 2 to the proposed Superannuation Legislation Amendment Act 1998.
Part 8 commencement
20.4 In the event that Part 3 of Schedule 5 to the proposed Taxation Laws Amendment Act (No. 3) 1998 commences before the proposed Australian Prudential Regulation Authority Act commences, Part 8 of Schedule 16 comes into effect at the time of the commencement of the proposed Australian Prudential Regulation Authority Act.
20.5 In the event that Part 3 of Schedule 5 to the proposed Taxation Laws Amendment Act (No. 3) 1998 commences after or at the same time as the proposed Australian Prudential Regulation Authority Act, Part 8 of Schedule 16 comes into effect immediately after the commencement of Part 3 of Schedule 5 to the proposed Taxation Laws Amendment Act (No. 3) 1998.
Division of responsibility
20.6 Item 2 of Schedule 16 allocates functions, powers and duties to ASIC or APRA and explains which regulator has the general administration of the various provisions of the Act. APRA, for example, has Parts 13, Accounts, Statements and Audits of Superannuation Entities, and15, Standards for Trustees, Custodians and Investment Managers of Superannuation Entities. APRA will also receive notifications of adverse events in relation to the financial position of superannuation entities under section 106. These powers relate to the prudential supervision of superannuation entities, and endow APRA with functions and powers to enable it to supervise the financial securityof these providers.
20.7 Proposed paragraphs 6(1)(a) and (b) confer functions and powers on APRA.
20.8 Proposed paragraphs 6(1)(c) and (d) confer functions and powers on ASIC. For example, subparagraph (c)(iv) states that ASIC has the general administration of Parts 18 , Prohibited Conduct in relation to Superannuation Interests, and 19, Public Offer Entities Provisions relating to Superannuation Interests and Disclosure of Information. ASIC will also administer section 101, dealing with the duty of trustees to establish arrangements for dealing with inquiries or complaints from fund members and others. These matters relate to market integrity and consumer protection in superannuation, and are therefore matters within the responsibility of ASIC.
20.9 Proposed subsection 6(2) confers powers and duties on ASIC and APRA jointly. These are powers and duties which can equally be used as a tool of market integrity/consumer protection or prudential regulation. For example, Part25 of the Act, which deals with investigatory powers, confers powers and duties on both regulators (other than Division 3, which confers powers on APRA alone). This is because ASIC and APRA will both need to have access to a full range of powers in order to conduct their supervisory functions under the Act. ASIC and APRA will also share Part26, dealing with offences relating to statements and records and Part28, dealing with proceedings.
20.10 Close liaison between ASIC and APRA will ensure that the regulators adopt a co-ordinated approach to their dealings with entities in which they both have an interest. The Minister will have the power to give ASIC or APRA directions about the performance or exercise of their functions orpowers under the Act (proposed subsection 6(3)). This power is transferred from subsection 6(2) of the Act, and is extended to the actions of ASIC in order to preserve the Minister's discretion over the regulators' conduct under the Act.
20.11 In addition, section 284 is amended by item 21 to provide that APRA and ASIC must give to each other copies of reports of any investigation carried out under the Act.
20.12 To assist ASIC and APRA to co-operate, new section 298A (item 22) enables either regulator to appoint a 'member of staff' of the other regulator to carry out the functions of an 'authorised person' (defined in item 5) under the Act. Item 6 therefore inserts a definition of the expression 'member of staff ' into section10. It is expected that ASIC and APRA will enter a memorandum of understanding which will refer to such provisions and other matters.
Change of regulator and regulator's name
Items 1, 3, 4, 9, 12 20, 23, 28, 31 222
20.13 Until the commencement of the proposed Financial Sector Reform (Amendments and Transitional Provisions) Act (the FSR Act), the Insurance and Superannuation Commissioner is responsible for supervising all aspects of compliance with the Act, and conducts both market integrity/consumer protection and prudential regulation. On commencement of the proposed FSR Act, the Insurance and Superannuation Commissioner Act 1987 will be repealed and the office of Insurance and Superannuation Commissioner will no longer exist.
20.14 Schedule 16 repeals references in the Act to the Insurance and Superannuation Commissioner and replaces them with references to ASIC or APRA where appropriate. Item 1 of Schedule 16 amends the objects clause of the Act (section 3) to provide that APRA and ASIC will supervise superannuation funds, approved deposit funds and pooled superannuation trusts. In the case of provisions that are referable to both ASIC and APRA, the expression 'the Regulator' replaces references to the 'Insurance and Superannuation Commissioner' or the 'Commissioner'. Item9 inserts a definition of 'Regulator' into section 10 of the Act. The items which insert references to the Regulator in place of references to the 'Insurance and Superannuation Commissioner' or the 'Commissioner' are 19 and 169 222.
20.15 Items3 and 4 insert definitions of 'APRA' and 'ASIC' into section 10. The items which insert references to APRA in place of references to the 'Insurance and Superannuation Commissioner', the 'ISC' or the 'Commissioner' are: 14; 15; 18; 28 and 31 155.
20.16 The items which insert references to ASIC in place of references to the 'Insurance and Superannuation Commissioner' or the 'Commissioner' are 17 and 156 168.
20.17 Because the Act no longer refers to regulation conducted by a natural person (the Insurance and Superannuation Commissioner), but rather to the acts of an agency (ASIC or APRA), the Act no longer uses the expressions 'he or she' or 'his or her' when referring to the Commissioner. Amendments of the Act to refer to 'it' or 'its' are in items 12; 13; 16 and 23.
20.18 Similarly, because ASIC and APRA are not natural persons, references to documents in writing signed by the Insurance and Superannuation Commissioner are amended to refer to documents prepared 'in writing'. Subsection 265(1) is amended to clarify that ASIC and APRA may appoint an inspector under that provision in this way (item20).
Repeal of provisions
Items 7, 8, 10, 11, 24 27 and 29 - 30
20.19 Some of the provisions in the Act deal with general administrative matters which are more appropriately dealt with in the Australian Securities and Investments Commission Act 1989 and the proposed Australian Prudential Regulation Authority Act. For example, both the Australian Securities and Investments Commission Act and the proposed Australian Prudential Regulation Authority Act include comprehensive provisions dealing with the delegation of powers by the regulators. For this reason, it is no longer necessary to include in the Act a separate power to delegate functions under the Act. Therefore, the delegation power in section 351 of the Act is repealed.
20.20 Similarly, the annual reporting responsibilities of ASIC and APRA under the Commonwealth Authorities and Companies Act 1997 are dealt with in the Australian Securities and Investments Commission Act and the proposed Australian Prudential Regulation Authority Act. It is therefore no longer necessary to retain section 352 of the Act.
20.21 The secrecy provision in the Act (section 346) deals with the manner in which the ISC was required to treat information gathered by it about superannuation entities in the course of conducting its functions. This provision is broadly consistent with the secrecy provisions administered by the ISCunder other legislation for which it had responsibility, eg the Retirement Savings Account Act 1997 and Life Insurance Act 1995. However, it is different from the secrecy regime under which the ASC operated in relation to its corporate law functions.
20.22 The proposed Australian Prudential Regulation Authority Act contains a secrecy provision governing all of APRA's activities. Section 127 of the Australian Securities and Investments Commission Act, which previously related only to corporate regulatory functions, willbe extended to cover ASIC's new functions in insurance and superannuation regulation, sothatASIC will be able to perform all of its functions under the same secrecy regime. Therefore section 346 is also repealed.
20.23 The items which repeal superfluous powers, functions and definitions in the Act are: 7; 8; 10; 11; 24 - 27; 29 and 30.
Schedule 16, Parts 7 and 8: Amendments to take account of the Superannuation Legislation Amendment Act 1998 and the Taxation Laws Amendment Act (No. 3) 1998
20.24 The purpose of Parts 7 and 8 of Schedule 16 is to amend the Act taking into account the changes in the proposed Superannuation Legislation Amendment Act 1998 and the proposed Taxation Laws Amendment Act (No. 3) 1998, to reflect the change of regulatory responsibilities under the proposed FSR Act. References to the Insurance and Superannuation Commissioner in provisions of the Act amended by Part 1 of Schedule 2 to the proposed Superannuation Legislation Amendment Act 1998 and in Part 3 of Schedule 5 to the proposed Taxation Laws Amendment Act (No. 3) 1998 are repealed and references to ASIC, APRA or the Regulator, as appropriate, are substituted.
20.25 The items which substitute references to APRA in place of references to the Insurance and Superannuation Commissioner are 223 - 229. The items which substitute references to ASIC in place of references to the Insurance and Superannuation Commissioner are 232 and 233. The items which substitute references to the Regulator in place of references to the Insurance and Superannuation Commissioner are 230 and 231.