APRA and ASIC hosted Superannuation CEO Roundtables in June and July 2024, focusing on a central theme of “superannuation funds as investors of members’ money”.
The discussions brought together 12 superannuation CEOs from across the industry. Objectives of the roundtables included assessing how superannuation funds manage and invest members’ funds and ensuring robust oversight and governance within the industry. Additionally, the sessions highlighted the importance of maintaining a member-first approach in investment strategies, particularly in light of evolving regulatory expectations.
As Australia’s corporate, markets, and financial services regulator, ASIC is paying close attention to superannuation funds. The regulator aims to closely understand how super funds interact with the broader financial market and meet obligations concerning market integrity.
An emerging theme in these discussions was an increased interest from super firms in private market investment. InvestorDaily reports that, faced with market volatility, superannuation executives have “highlighted the appeal of private markets as a diversification tool, one that offers risk mitigation benefits alongside the ability to capture opportunities.”
One Australian Asset Management firm’s head of diversified portfolios comments that involvement in infrastructure, private equity, private credit, and other niche alternative assets ensures portfolios are “not simply tethered to equity risk and are able to benefit from more sources of risk and return”.
ASIC reminded trustees in the roundtables that investing in private markets must be treated with due diligence towards conduct obligations and a continued fostering of market integrity. ASIC notes that private markets are “not naturally as transparent as public markets and trustees need to be focused on providing transparency”.
ASIC chair Joe Longo notes, “While Australia’s private markets are dwarfed in size by our listed equity markets, their opacity presents an outsized risk to market integrity, particularly as more investors become exposed.”
See the full Superannuation CEO Roundtables press release for more information.
Focus Areas of the CEO Roundtables Resonate with ASIC’s Corporate Plan
The sentiment of ensuring oversight and enhancing transparency within Australia’s financial markets further supports areas outlined in ASIC’s recent Corporate Plan for 2024-2025. Within the plan, ASIC highlighted its enduring priorities.
Enforcement and compliance initiatives targeting:
- Systemic compliance failures by large financial institutions resulting in widespread consumer harm.
- Misconduct damaging market integrity, including insider trading, continuous disclosure breaches and market manipulation.
- Misconduct involving a high risk of significant consumer harm, particularly conduct targeting financially vulnerable consumers.
- New or emerging conduct risks within the financial system.
- Governance and directors’ duties failures.
Supervision and surveillance to understand, assess and change behaviours, aiming to:
- Ensure that entities and individuals act in the best interests of consumers and investors.
- Ensure financial services providers have the resources, competence and systems to operate efficiently, honestly and fairly.
- Monitor licensee compliance with their licence permissions.
- Promote trust and confidence in Australian financial markets.
The regulator also emphasises its drive to strengthen integrity across markets, including:
- Examining changes in public and private markets, including the significant growth of private markets and the implications for the integrity and efficiency of public markets.
- Enhancing monitoring and reporting on market cleanliness and expanding beyond equity markets.
- Surveillance of financial reports of listed entities, unlisted entities that are of public interest, previously grandfathered large proprietary companies and superannuation funds.
Longo comments, “Trust in the financial system and markets means greater confidence which means more investment. That has direct benefits for the jobs and opportunities of Australians.”
Enhancing Market Integrity—and Enforcement Actions
Not only do APRA and ASIC appear invested in working with the Superannuation industry to solidify market integrity, but the regulators are also implementing significant enforcement actions.
In August 2024, APRA imposed additional licence conditions on two trustees with a combined $98.7 billion under their management. Under these conditions, both trustees are required to “engage an independent expert to conduct a review in relation to the requirements under Prudential Standard SPS 520 Fit and Proper and the trustees’ compliance with the duty to act in the best financial interests of beneficiaries of the funds in making expenditure decisions”.
Read more about these additional licence conditions in APRA’s press release.
APRA appears to be making a clear statement that the Superannuation industry is on notice. In July, APRA issued another trustee with $10.7 million in infringement notices for compliance deficiencies. Several other trustees have seen additional licence conditions imposed upon them in recent years.
What Can Australian Superannuation Firms Do to Reduce Risk of Non-Compliance?
Every financial firm, regardless of size or strategy, deserves the tools to confidently operate in a compliant manner and protect itself from financial and reputational harm. Technology plays a vital role in helping superannuation and other financial firms proactively identify red flags and remain compliant with evolving regulations.
MyComplianceOffice (MCO) exists to help financial institutions:
- Manage ongoing learning and licensing requirements to ensure employees are deemed “fit and proper” for the requirements of their roles.
- Proactively flag suspicious activities across trading and electronic communications (eComms).
- Track and manage conflicts of interest.
- Make it easy for employees to declare conflicts and provide attestations.
- Quickly produce detailed reporting required by regulators upon examination.
MCO’s integrated compliance management suite enables firms to identify conflicts of interest more efficiently across their organisation. MCO provides a consolidated platform for compliance teams to monitor and manage close personal relationships, personal account dealing, MNPI, outside business activities, gifts, entertainment, and hospitality, and more.
To ensure employees at all levels are deemed “fit and proper” for the requirements of their roles, MCO offers a streamlined Representative Registrations and Licensing (RRL) module. RRL integrates with internal systems, including HR, to provide assurance that licensing and continuing education requirements are kept up to date across your firm. It also manages ongoing renewals, qualifications, exams, and continuing education for all staff.
When it comes to surveillance of electronic communications, MCO’s eComms Review solution enables firms to detect, prevent, and measure potentially harmful, unethical, or unlawful messages sent by their employees. It uses advanced AI risk-scoring and classification to alert compliance teams to risky communications while also identifying patterns across multiple channels that may warrant investigation, employee training, or policy adjustment.
eComms Keep helps firms prove the maintenance and preservation of communications records to regulatory bodies. Data from various sources, including email, SMS, Skype, WhatsApp, Signal, Bloomberg, Reuters, ICE Chat, Microsoft Teams, and more, is securely preserved while producing easily viewable audit trails.
Get Noticed by Regulators—for all the Right Reasons
Superannuation funds play a crucial role in Australia’s financial markets. While there are many complexities involved in maintaining a member-first approach to driving high-performing investment outcomes, technology can simplify aspects such as regulatory compliance.
As APRA and ASIC continue to drive robust oversight and governance within the industry, consider how your firm can leverage solutions, such as MCO, to tighten internal surveillance and controls, reduce the risk of non-compliance, and get noticed by regulators—for all the right reasons.
Download your Representative Registrations and Licensing (RRL) brochure to learn more about ensuring all staff are deemed "fit and proper" for their respective roles.
