Explanatory Memorandum
(Circulated by authority of the Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan)7 - Schedule 3 - Actuaries, auditors and defined benefit funds
Part 1 - Actuaries and auditors
Retirement Savings Accounts Act 1997
7.1 Section 66 of the RSA Act deals with the obligations of a person performing audit functions under the Act or the Regulations. The obligation to report arises where a person forms the opinion that it is likely that a contravention of this Act or the regulations may have occurred, may be occurring, or may occur in relation to the RSA provider.
7.2 This item inserts paragraph 66(1)(c) to restrict the operation of these reporting obligations to the circumstance where the contravention, or likely contravention of the Act or regulations, is of such a nature that it may affect the interests of holders of retirement savings accounts. The purpose of this amendment is to target reporting obligations to circumstances where there are prudential concerns that will have an impact on retirement savings account holders.
7.3 This item extends the obligation to report under subsection 66(3) to require reporting to both the Regulator and the RSA provider where section 66 applies to the person. The heading is altered to reflect this change.
7.4 The item also amends subsection 66(3) to clarify that the obligation to report arises as soon as practicable after forming the opinion under subsection 66(1). It is necessary to clarify when the obligation to report arises under subsection 66(3) because a contravention of this subsection is an offence.
7.5 This item repeals subsections 66(4), (5), (6), (7), (8) and (9) and replaces them with four new subsections, which clarify the need to tell the Regulator or the RSA provider about a matter and the consequences of failure to comply with the reporting obligations under the section.
7.6 The amended version of subsection 66(5) clarifies the conduct that leads to the offence of providing misleading information. The heading of this subsection has been amended to more aptly describe the offence by referring to misinformation.
7.7 The conduct targeted by subsection 66(5) is similar, but not equivalent to, the conduct punishable under section 137.1 of the Criminal Code, thus this item inserts a note after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility.
7.8 This fault liability offence retains the penalty of imprisonment for 12 months, which is consistent with the penalty that previously applied to the offence and with the penalty prescribed for a contravention of section 137.1 of the Criminal Code.
7.9 The amended version of subsection 66(6) extends the protection against liability in a civil action or civil proceeding to a person providing information under this section to the Regulator or the RSA provider. The purpose of this amendment is to recognise that the person must provide information to the Regulator and the RSA provider at the same time, and that protection from liability should be offered for the provision of this information.
7.10 This item makes it clear that a person is guilty of an offence where the person contravenes subsection 66(3). The new subsection 66(7) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a penalty of 50 penalty units. The new subsection 66(8) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser penalty of 25 penalty units. A note is inserted after subsection 66(8) drawing attention to the provisions of the Criminal Code relating to strict liability and to the general principles of criminal responsibility. The penalty levels applied to these offences are consistent with existing penalties in the SIS Act for failure to provide information to the Regulator.
7.11 Section 66A is inserted to encourage an auditor to provide information to the Regulator that would assist the Regulator in performing its functions. This section protects the auditor from any action, claim, demand or liability by any other person in relation to the information provided to the Regulator where that information is provided in good faith.
7.12 Section 66B makes it clear that qualified privilege against self-incrimination is conferred on those persons providing information to the Regulator under section 66. An individual cannot avoid the obligation to provide information under section 66 by claiming privilege in respect of that information. However, section 66B protects an individual who asserts privilege by providing that such information is not admissible in evidence against that individual in a criminal proceeding or a proceeding for the imposition of a penalty ('use immunity').
7.13 The purpose of section 66B is to provide adequate protection for the individual, whilst retaining the ability of the Regulator to obtain information and use that information to effectively prosecute persons who contravene the SIS Act.
Superannuation Industry (Supervision) Act 1993
7.14 Section 129 of the SIS Act places obligations on a person performing audit or actuarial functions under the Act or the regulations. The obligation to report to the Regulator or the trustee arises where a person forms the opinion that it is likely that a contravention of this Act or the regulations may have occurred, may be occurring, or may occur in relation to a superannuation entity.
7.15 This item inserts paragraph (1)(c) to restrict the operation of these reporting obligations to the circumstance where the contravention, or likely contravention of the Act or regulations, is of such a nature that it may affect the interests of members or beneficiaries of the entity. The purpose of this amendment is to target reporting obligations to circumstances where there are prudential concerns that will have an impact on fund members or beneficiaries.
7.16 This item extends the obligation under subsection 129(3) to require reporting to both the Regulator and the trustee of the entity. The heading is amended to reflect this change.
7.17 The item also amends subsection 129(3) to clarify that the obligation to report arises as soon as practicable after forming the opinion mentioned in paragraph 129(1)(a). It is necessary to clarify when the obligation to report arises under subsection 129(3) because a contravention of this subsection is an offence.
7.18 This item repeals subsections 129(3A), (3B), (4), (5), (6) and (7) and replaces them with five new subsections (129(3A) - (6) that deal with the requirements to report in relation to compliance and the consequences of failure to comply with the reporting obligations.
7.19 This clarifies the timing of the obligation to report by amending subsection 130(2).
7.20 This item repeals subsections 130(2A), (2B), (3), (4), (5) and (6) and replaces them with five new subsections (130(2A) - (5)) that deal with the requirements to report in relation to solvency and the consequences of failure to comply with the reporting obligations.
7.21 The new section 130A is inserted to encourage an auditor or actuary to provide information to the Regulator if they think that the information would assist the Regulator in performing its functions under either the SIS Act or the Financial Sector (Collection of Data) Act 2001. This section protects the auditor or actuary from any action, claim, demand or liability by any other person in relation to the information provided to the Regulator where that information is provided in good faith.
7.22 The new section 130B makes it clear that qualified privilege against self-incrimination is conferred on persons providing information to the Regulator under sections 129 and 130. An individual cannot avoid the obligation to provide information under sections 129 or 130 by claiming privilege in respect of that information. However, section 130B protects an individual who asserts privilege by providing that such information is not admissible in evidence against that individual in a criminal proceeding or a proceeding for the imposition of a penalty ('use immunity').
7.23 The purpose of section 130B is to provide adequate protection for the individual, whilst retaining the ability of the Regulator to obtain information and use that information to effectively prosecute persons who contravene the SIS Act.
7.24 This item provides that the amendments contained in the Bill do not apply where a matter was reported before the commencement of Schedule 3, Part 1 of the Bill to an RSA provider under section 66 of the RSA Act, or to a trustee of a superannuation entity under sections 129 or 130.
Part 2 - Defined benefit funds
Superannuation Industry (Supervision) Act 1993
7.25 Schedule 3, Part 2 of the Bill deals with the implementation of actuarial recommendations for defined benefit funds.
7.26 A definition of defined benefit fund is inserted in subsection 10(1) of the Act. Its meaning is given by the Superannuation Industry (Supervision) Regulations 1994. As the requirements and obligations in relation to actuarial recommendations are expressed in the Regulations, the existing definition in the Regulations is imported to ensure consistency.
7.27 A definition of defined benefit member will be inserted in subsection 10(1). Its meaning is given by the Superannuation Industry (Supervision) Regulations 1994. As the requirements and obligations in relation to actuarial recommendations are expressed in the Regulations, the existing definition in the Regulations is imported to ensure consistency.
7.28 The new section 130C deals with the obligations of a person performing audit or actuarial functions under the Act or the regulations and subsection 130C(1) sets out when the section applies. The section applies where the person forms the opinion that there has been a failure to implement an actuarial recommendation relating to contributions to the fund by the employer-sponsor. In order for the reporting obligation in section 130C to arise, the recommendations must have been developed in accordance with the Regulations and the trustee or employer-sponsor of the fund must have been required to implement the recommendations.
7.29 This item restricts the application of section 130C to circumstances where there are prudential concerns, namely, where the failure to implement the recommendation is of such a nature that it may affect the interests of members or beneficiaries of the fund.
7.30 The new subsection 130C(2) imposes an obligation on a person report to the Regulator and the trustee of the superannuation fund where the person forms the opinion that there has been a failure to implement actuarial recommendations. The person is required to report to the Regulator and the trustee as soon as practicable after forming that opinion.
7.31 The new subsection 130C(3) is designed to avoid duplication of reporting by providing an exception to the requirement imposed under subsection 130C(2). A person is not required to report to the Regulator if the person has been told by another person to whom this section applies that this other person has already told the Regulator and a trustee about the matter, and the person has no reason to disbelieve that other person.
7.32 The new subsection 130C(4) makes it clear that a person must not misinform another person to whom this section applies regarding the obligation to report to the Regulator and the trustee under section 130C.
7.33 The conduct targeted by subsection 130C(4) is similar, but not equivalent to, the conduct punishable under section 137.1 of the Criminal Code, thus this item inserts a note after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility.
7.34 The offence in subsection 130C(4) requires proof of fault and carries a maximum penalty of imprisonment for 12 months. This is consistent with the penalty that applies for similar offences in subsections 129(3B) and 130(2B) of the Bill and with the penalty prescribed for a contravention of section 137.1 of the Criminal Code.
7.35 The new subsection 130C(5) makes it clear that if a person gives information to the Regulator in accordance with section 130C, the person may not be subject to any civil action or proceeding in relation to that information.
7.36 This item provides that a person is guilty of an offence where the person contravenes subsection 130C(2). The new subsection 130C(6) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a penalty of 50 penalty units. The new subsection 130C(7) sets out the strict liability offence, which does not require proof of fault elements, and carries a penalty of 25 penalty units. A note is inserted after subsection 130C(7) drawing attention to the provisions of the Criminal Code relating to strict liability and to the general principles of criminal responsibility. The penalty levels applied to these offences are consistent with existing penalties in the SIS Act for failure to provide information to the Regulator.