Super funds on notice on related party expenditure
The funding of advertising campaigns such as Industry Super Australia’s (ISA’s) ‘fox in the hen house’ advertisements is likely to come under more intense scrutiny under governance changes outlined by the Australian Prudential Regulation Authority (APRA).
The regulator has written to all superannuation funds flagging enhancements to the superannuation governance framework with the letter specifically referencing the use of member money, “particularly where payments are made to related parties”.
The APRA letter comes just weeks after the regulator told Senate Estimates the manner in which industry funds had sought to explain their contribution to advertising campaigns such as the ‘fox in the henhouse’ exercise.
The APRA letter said the regulator “continues to observe instances of poor governance practices by some RSE [superannuation fund] licensees in relation to decisions regarding the use of member money and fund expenditure, particularly where payments are made to related parties”.
“The combination of poor processes and oversight, and failure to take action when issues are identified, can lead to inappropriate costs being incurred that ultimately negatively affect outcomes for beneficiaries,” it said. “Accordingly, APRA intends to consult on proposed requirements for RSE licensees to meet minimum expectations when making decisions which require the use of fund assets, whether these decisions relate to expenditure incurred in running the fund, setting aside money in reserves or the setting of fees and costs policies to fund these decisions.”
“These minimum expectations will include implementing appropriate policies and procedures to ensure there is adequate rigour in decision-making, monitoring and transparency related to the use of members’ money,” the APRA letter said.
The letter also reminded superannuation fund executives that the regulator already proposed amending reporting collection to support greater accountability and transparency on RSE licensee expenditure in light of the Government’s proposed reforms to allow APRA to collect more expense data on a look-through basis.
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