The Government welcomes comments on whether all superannuation fund annual returns be made public either through ASIC or APRA.
Views from the consultation process
Submissions generally supported increased public disclosure of annual returns. Most of the supporters agreed that transparency would be enhanced through improved disclosure.
Those who did not support this proposal considered that only members of funds really need such information (and they already receive it), particularly given that employer-sponsored funds are not open to the public.
Other comments related to the need to address compliance costs, commercial sensitivities and privacy issues (ASFA). It was also noted that insufficient uniformity in the way in which fees and investment returns are disclosed made it harder to make meaningful comparisons (HortSuper). It was also suggested that '[r]ather than prescribing new rules for all, it would be more efficient to lift the standards for those funds where such information is not yet readily available' (the Securities Institute of Australia).
During focus group sessions, participants suggested that any recommendations on this issue incorporate an assessment of the likely costs and benefits of the proposal prior to development. Participants also suggested the need for information to be disclosed in a uniform manner, and that a template for trustees to use would assist uniformity of reporting.
Consideration of the proposal
The aim of this proposal is to make trustees more accountable and increase market transparency by making key superannuation fund financial information available to the public and market at large. Making such information publicly available could enable the market to better scrutinise fund performance and would place greater discipline on trustees.
The SWG acknowledges that trustees are required to make a range of information available to members through existing disclosure requirements, and that trustees are also required to provide financial information to APRA.
The requirements for disclosure of fund and member-specific information to members are contained in the Corporations Act, following the commencement of the FSRA on 11 March 2002. The provision of information is restricted to fund members, with no requirement for full public disclosure.
While trustees are obliged to provide information to members under the disclosure requirements, information provided by trustees to APRA (annual returns and audited financial statements) is not made available to fund members. However, the information APRA receives via annual returns will be reported to members in some instances as part of the annual reporting requirements, most notably the statement of financial position and the statement of net assets. Members may also ask for a copy of the audited financial statements. However, this information is not always available to the market to enable on-going comparisons.
In many employer-sponsored funds, the equal representation rules provide an avenue for members to be more involved in the operation of their fund.
Submissions generally indicated support for improved disclosure to the wider community of information about fund performance. There is a question of how much information should be disclosed to the public: all of the information provided to APRA in its annual returns; only fund information that is provided to members and audited financial accounts; or some combination of the two?
Information currently provided to APRA in annual returns is supplied for prudential purposes and it may not be appropriate for all of that information to be disclosed to the public. Further, APRA is currently conducting a review of the information required in annual returns in the context of the implementation of the Financial Sector (Collection of Data) Act 2001 (the Data Act). In light of that review, the SWG considers that at this stage the information that should be disclosed to the public should be the fund information that is provided to members, along with the audited financial statements. This is consistent with the requirement for responsible entities of registered managed investment schemes to make public the annual reports for registered schemes.
Once APRA has completed its review of the annual return information, further consideration could be given to whether there is any additional information that could usefully be disclosed to the public at large.
The Issues Paper proposal covered all regulated superannuation funds, except SMSFs and EPSSSs. The SWG is conscious that there could be privacy concerns associated with making public the financial statements of funds with a small number of members. It proposes, therefore to also exempt from these publication requirements small APRA funds (those with fewer than five members which are required to have an Approved Trustee).
The Issues Paper suggested that either APRA or ASIC could make this information available on their public databases. There was little comment in submissions about which regulator should make this information available.
APRA has an existing database, and is enhancing its annual return collections and data warehousing systems as it implements the requirements of the Data Act. While APRA receives annual return information, it does not have a readily available system to make this information publicly available at this time.
ASIC is generally responsible for disclosure to members and has existing comprehensive data systems and search facilities. By amending certain regulations, ASIC would be able to require that fund information provided to members be forwarded to them, and may be the appropriate regulator to provide this disclosure function in the first instance.
The SWG recommends that for funds other than those with fewer than five members and EPSSSs, ASIC use its existing electronic facilities to make the audited accounts of funds and the fund information required to be given to members publicly available, provided the costs are reasonable.
At present, while members of superannuation funds are given summary financial information and can request the audited financial statements of the fund, there is no requirement that they be advised of a qualification on the auditor's report. The SWG considers that, as an additional measure to improve trustees' accountability, particularly given the important role proposed to be played by the audited risk management plan, any qualification of the auditor's report should be notified to members. This could either be required to be disclosed annually or as a 'significant event' (defined in the on-going disclosure requirements included in the Corporations Act by the FSRA).
The SWG recommends that trustees be required to notify superannuation fund members of the presence, and nature, of any qualification of the fund's auditor's report.