Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 3) (113 of 2004)

Schedule 1   Amendments commencing on 1 July 2004

[7]   After regulation 4.13

insert

4.14 Operating standard - fitness and propriety of RSE licensee

(1) In this regulation:

disqualified person means a disqualified person for Part 15 of the Act.

fit and proper standard means the standard mentioned in subregulation (3).

(2) For paragraphs 31 (2) (ma), 32 (2) (fa) and 33 (2) (ba) of the Act, the standard stated in this regulation is applicable to an RSE licensee.

Note An RSE licence will not be granted unless APRA is satisfied under paragraph 29D (1) (d) of the Act that the standard stated in this regulation is met.

(3) Subject to subregulations (5) and (6), an RSE licensee meets the fit and proper standard if the RSE licensee possesses relevant attributes that enable the RSE licensee to properly discharge the duties and responsibilities of an RSE licensee in a prudent manner.

(4) The attributes include, but are not limited to:

(a) character, competence, diligence, experience, honesty, integrity and judgement; and

(b) educational or technical qualifications, knowledge and skills relevant to the duties and responsibilities of an RSE licensee.

(5) An RSE licensee that is a body corporate does not meet the fit and proper standard if:

(a) the body corporate is a disqualified person; or

(b) a director of the body corporate is a disqualified person, and the body corporate does not, within 14 days after the body corporate becomes aware that the director is a disqualified person:

(i) notify APRA of that fact; and

(ii) remove the director.

(6) An RSE licensee that is a group of individual trustees does not meet the fit and proper standard if:

(a) an individual trustee who is a member of the group of individual trustees (the member ) is a disqualified person; and

(b) the group of individual trustees does not, within 14 days after the group becomes aware that the member is a disqualified person:

(i) notify APRA of that fact; and

(ii) remove the member from the group.

(7) An RSE licensee must meet the fit and proper standard for all the period during which the RSE licence continues in force.

4.15 Operating standard - adequacy of resources of, or available to, trustees of registrable superannuation entities (RSE licensees)

(1) In this regulation:

adequate financial resources includes:

(a) adequate resources to ensure the ongoing solvency of the RSE licensee; and

(b) adequate liquidity to support the business operations of the RSE licensee.

adequate human resources includes adequate levels of personnel with the necessary knowledge, skills and expertise to enable the RSE licensee to effectively carry out its operations.

adequate technical resources includes:

(a) adequate technical systems, including adequate hardware and software; and

(b) adequate systems and resources to ensure protection, security and privacy of confidential, personal and sensitive material; and

(c) adequate technical resources to handle transaction processing and other operations; and

(d) adequate technical resources to handle any significant changes or increases in business size or capacity that are planned or forecast or that are likely to occur; and

(e) adequate disaster recovery and business continuity plans; and

(f) adequate records maintenance systems.

(2) For paragraphs 31 (2) (sb), 32 (2) (lb) and 33 (2) (jb) of the Act, the standard stated in this regulation is applicable to trustees of registrable superannuation entities as follows:

(a) if the trustee is a body corporate that holds an RSE licence - the body corporate;

(b) if the trustee is a member of a group of individual trustees that holds an RSE licence - the group.

Note An RSE licence will not be granted unless APRA has no reason to believe that the RSE licensee law would not be complied with. The RSE licensee law includes this regulation. See subsection 10 (1) and paragraph 29D (1) (a) of the Act.

(3) The body or group must, for all of the period during which the RSE licence continues in force, have adequate human, technical and financial resources available to it to enable it to undertake its activities as an RSE licensee.

(4) The body or group has adequate human, technical or financial resources available to it if:

(a) it has adequate resources of that kind in its own right; or

(b) it has available to it adequate resources of that kind under an enforceable agreement or undertaking.

4.16 Operating standard - outsourcing arrangements of RSE licensees

(1) In this regulation:

material business activity means a business activity of the RSE licensee of a registrable superannuation entity, a disruption to which, or the poor performance of which, has the potential to:

(a) affect the interests of members or beneficiaries of the entity; or

(b) have a significant impact on the business operations, reputation, rate of return, profitability or net assets of:

(i) the entity; or

(ii) the RSE licensee of the entity.

material outsourcing agreement means an agreement or arrangement:

(a) under which a person other than the RSE licensee (a service provider ) is to perform a material business activity; and

(b) entered into with the service provider by:

(i) if the RSE licensee is a body corporate - the body corporate; or

(ii) if the RSE licensee is a group of individual trustees - the group as a whole, or any member of the group.

service provider does not include:

(a) if the RSE licensee is a body corporate - an employee of the body corporate acting in the capacity of an employee of the body corporate, or an officer of the body corporate acting in the capacity of an officer of the body corporate; or

(b) if the RSE licensee is a group of individual trustees - an employee of the group, or an employee of any member of the group, acting in the capacity of an employee of the group, or in the capacity of an employee of a member of the group.

(2) For paragraphs 31 (2) (sa), 32 (2) (la) and 33 (2) (ja) of the Act, the standard stated in this regulation is applicable to material outsourcing agreements.

Note An RSE licence will not be granted unless APRA has no reason to believe that the RSE licensee law would not be complied with. The RSE licensee law includes this regulation. See subsection 10 (1) and paragraph 29D (1) (a) of the Act.

(3) A material outsourcing agreement must comply with this regulation.

(4) A material outsourcing agreement must:

(a) be in writing; and

(b) state the commencement date of the agreement; and

(c) contain default arrangements and termination provisions; and

(d) provide for dispute resolution; and

(e) contain liability and indemnity provisions; and

(f) provide for confidentiality, privacy and security of information; and

(g) contain a pricing, fee and payments structure in relation to the performance of the material business activity; and

(h) contain audit, monitoring and assessment procedures in relation to the performance of the material business activity; and

(i) provide for business continuity planning, including transfer protocols relating to the handover of functions from the service provider to either a successor service provider or the RSE licensee on the cessation of the material outsourcing agreement.

(5) A material outsourcing agreement must provide that:

(a) the service provider must, on the written request of the RSE licensee or APRA, and within a time and at a place specified in the request that is reasonable in the circumstances, provide the RSE licensee or APRA, as requested, with any documents or information in the possession of the service provider relating to:

(i) the material outsourcing agreement; or

(ii) the material business activity performed under the agreement; and

(b) the service provider must, on the written request of the RSE licensee or APRA, and at a time that is reasonable in the circumstances, allow the RSE licensee or APRA, as requested, to:

(i) conduct on-site visits to the service provider's premises; and

(ii) access any documents or information relating to the registrable superannuation entity held at those premises; and

(c) the service provider must, on the written request of the RSE licensee or APRA, and within a time specified in the request that is reasonable in the circumstances, have an audit of its business activities under the material outsourcing agreement conducted by an independent auditor.

(6) A material outsourcing agreement must provide that any agreement or arrangement that a service provider enters into with another service provider for the performance of a material business activity under the material outsourcing agreement must comply with this subregulation and with subregulations (4) and (5), as if the agreement or arrangement were a material outsourcing agreement.

(7) An RSE licensee or a service provider must not charge APRA a fee for any of the following:

(a) the provision of, or provision of access to, any documents or information under subregulation (5);

(b) the provision of access to the service provider's premises under subregulation (5);

(c) the conduct of an independent audit requested under subregulation (5).

(8) An RSE licensee must, if requested to do so by APRA, take all reasonable steps to enforce the material outsourcing agreement against a service provider in relation to:

(a) any matter mentioned in paragraph (5) (a), (b) or (c); and

(b) the matter mentioned in subregulation (6).

Note Part 15 of the Act also contains standards for trustees, custodians and investment managers of superannuation entities.

4.17 Outsourcing arrangements for licensing transition period

(1) In this regulation:

arrangements includes agreements or arrangements entered into at any time before the end of the licensing transition period.

business activity means a business activity that would be a material business activity if the business activity was a business activity of an RSE licensee.

(2) Any arrangements that are in place for the outsourcing of a business activity that were entered into by a person who:

(a) was a trustee of a registrable superannuation entity at the start of the licensing transition period; and

(b) was not an RSE licensee, or was not a member of a group that was an RSE licensee, at the time the arrangements were entered into;

must, at or before the end of the licensing transition period:

(c) comply with the standard stated in regulation 4.16; or

(d) be terminated by the person.

Note Licensing transition period is defined in subsection 10 (1) of the Act.