In brief
ASIC issued Class Order 14/509 yesterday providing late, but welcome, breathing space for superannuation trustees to update their websites to disclose executive remuneration and other information. The Class Order provides 'safe harbour' timeframes for disclosure. And today, ASIC has released Information Sheet 197 giving guidance on the new PDS fee and cost disclosure requirements applying from 1 July 2014 (on which we will be reporting separately). ASIC also promises to extend its 'facilitative compliance approach' for another 12 months – an acknowledgement, perhaps, that complying is often hard. ASIC has also said it will provide relief from fees and costs disclosure to responsible entities of managed investment schemes, though REs might be nervous about relying on a media release as the source of relief. Partner Geoff Sanders , Senior Associate Frances Dunn and Lawyer Vivien Campbell report.
How does it affect you?
- From 1 July 2014, each RSE licensee of a Registrable Superannuation Entity (RSE) will be required, under section 29QB of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS), to publish on the RSE's website, and keep up to date at all times, details of remuneration of its executive officers (whether paid by the RSE licensee or a related entity), as well as copies of certain governing documents, policies and reports relating to the RSE licensee and the RSE itself. SIS Regulations 2.37 and 2.38 prescribe the remuneration details and the specific information and documents required under SIS section 29QB.
- Under Class Order [CO 14/509] (the Class Order), ASIC has granted a separate 'safe harbour' timeframe for each of the licensee's disclosure obligations. The effect of the Class Order is that if the licensee publishes or updates the prescribed information within the timeframe specified in the Class Order, the licensee will be deemed to have complied with the relevant obligation in SIS s29QB.
Website disclosure requirements
SIS s29QB, which was introduced as part of the Stronger Super reforms, imposes on each RSE licensee a broadly framed obligation to make certain information regarding the licensee's 'executive officers' (as defined in SIS) and the fund itself publicly available on the fund's website, and then to keep that information 'up to date at all times'. The matters requiring disclosure are specified in SIS Regulations 2.37 and 2.38. Contravention of s29QB is a strict liability offence against SIS, attracting a fine of 50 penalty units.
The disclosure obligations in s29QB commence from 1 July 2014 (their original commencement date of 1 July 2013 having been deferred by ASIC Class Order [CO 13/830] as amended).
Section 29QB itself sheds no further light on how soon a licensee must update its website following an event that impacts on a document or piece of information it must disclose. Following ASIC Consultation Paper 219, in the Class Order ASIC has revealed its policy position on this matter and provides a measure of clarity to superannuation licensees. The Class Order effectively establishes a 'safe harbour' timeframe for compliance, by inserting into s29QB a list of very specific timeframes within which a disclosure or update (as applicable) published on the licensee's website will be taken to satisfy the relevant disclosure requirement.
In its new Regulatory Guide 252 accompanying the Class Order, ASIC expresses the view that failure to update the relevant information or document within the safe harbour period amounts to a breach of s29QB and, for Australian financial services licence holders, may also trigger breach reporting obligations under the Corporations Act 2001 (Cth). Trustees should therefore treat the safe harbour periods as deadlines rather than guidelines.
Safe harbour for executive remuneration
ASIC has granted a safe harbour of 20 business days for updating the disclosures required under s29QB regarding changes to executive personnel. However, in relation to information about payments, benefits and compensation for executive officers relating only to the current or most recently completed financial year, RSE licensees have been granted a four-month safe harbour from the end of the financial year to which the information relates. The following table outlines the disclosure obligations and corresponding safe harbour periods.
| Matter requiring disclosure | Safe harbour commencement and duration |
|---|---|
|
General information about the licensee's executive officers (refer to items 1 to 4 of the table in SIS Regulation 2.37). Includes:
|
20 business days after the relevant event occurs (or, where an executive officer changes their name, after the officer advises the licensee of the change). |
|
Information about payments and benefits relating to executive officers (refer Items 5 to 16 of the table in SIS Regulation 2.37). Includes:
|
ASIC has generally given a period of four months after the end of the most recently completed financial year for the relevant information to be updated. For disclosure of termination benefits (refer to item 8 in SIS Regulation 2.37), the safe harbour period will be four months from the end of the current financial year in which the termination occurred. (Trustees should note that, for any obligation to publish information for the two most recently completed financial years, the safe harbour regime does not allow four months in which to achieve initial compliance. Rather, where (for example) a fund has a financial year ending 30 June, by 1 July 2014 the RSE licensee would need to publish the information for the financial year ended 30 June 2013, but information for the financial year ended 30 June 2014 would only need to be published by 31 October 2014.) |
Key fund documents, reports and policies
In addition to the new executive remuneration disclosure rules, from 1 July 2014 licensees will be required under SIS Regulation 2.38 to publish each of the policies, reports and documents detailed in the table below on the fund's website, and to update them as necessary.
While the basic safe harbour timeframe for disclosures required by SIS Regulation 2.38 is 20 business days, licensees should pay close attention to the Class Order and related guidance for precisely when that period commences for each disclosure obligation.
| SIS Regulation | Information/document requiring disclosure | Safe harbour commencement and duration |
|---|---|---|
| 2.38(2)(a) to (c) | Current trust deed (including unincorporated material), governing rules, rules relating to the nomination, appointment and removal of trustees or trustee directors. | Within 20 business days after the document begins to apply (or, for amendments including replacements, the later of the date and the effective date of the amendment). |
| 2.38(2)(d) | Most recent actuarial report for each defined benefit fund. | Within 20 business days after the licensee receives the report. |
| 2.38(2)(e) | Most recent PDS for each superannuation product on offer. | Within 20 business days after a copy (including any supplementary or replacement PDS) is first given to a person in a recommendation, issue or sale situation. |
| 2.38(2)(f) | Annual report for the previous financial year. | Within 20 business days of when the report is first provided or made available to a member. |
| 2.38(2)(g) | Financial services guide. | Within 20 business days after the FSG is first given to a person under the general obligation to do so in the Corporations Act (ie s941A or 941B). |
| 2.38(2)(h) | A summary of each significant event or material change notice made to members within the previous two years. | Within 20 business days after the notice is first sent to members. |
| 2.38(2)(i) | Name and ABN of each outsourced service provider who provides a service that may affect a material business activity of the entity. | Within 20 business days after the person is appointed to provide the service. |
| 2.38(2)(j) | For each executive officer of the licensee: their name, qualifications and relevant experience as a trustee or board member, including periods served. | Within 20 business days after either the person's appointment as an executive officer, or the end of each financial year during which the person served as an executive officer (whichever applies). |
| 2.38(2)(k) | Record of attendance at board meetings for each director for the past seven financial years (or, if the director has served for a period of less than seven years, for that period). | Within 20 business days after the end of each financial year during some or all of which the director has served. |
| 2.38(2)(l) | Register of relevant interests and register of the relevant duties, in each case as at the end of the most recent quarter. | Within 20 business days after the end of the quarter. |
| 2.38(2)(m) | Summary of conflicts management policy. | Within 20 business days after the policy being established, amended or replaced. |
| 2.38(2)(n) | Proxy voting policies. | Within 20 business days after the policy being established, amended or replaced. |
| 2.38(2)(o) | A summary of when (during the previous financial year) and how the entity has exercised its voting rights in relation to shares in listed companies. | Within 20 business days after the end of the relevant financial year. |
| 2.38(3)(a) | Constitution of the RSE licensee. | Within 20 business days after the constitution beginning to apply in relation to the licensee or being amended or replaced. |
| 2.38(3)(b) | RSE licensee's annual financial statement for the previous financial year. | The day that the statement is first lodged with ASIC or provided to a member of the RSE licensee. |
Implementation challenges
The Class Order and related guidance will certainly be seen by superannuation trustees as a welcome clarification of the timing of the necessary website disclosures in advance of 1 July. Further, some comfort can be taken from the strong symmetry between the new executive remuneration disclosure regime and the equivalent disclosure obligations already applying to listed public companies.
Nevertheless, there remain various challenges, both in interpreting and implementing the website disclosure requirements, which each fund will need to work through in light of its own particular circumstances. For example, we envisage the following types of issues arising (among others), particularly as funds work toward achieving initial compliance from 1 July 2014:
- The application of the remuneration disclosure requirements require a level of subjective interpretation in the case of board members who are not paid directly for their work or where it may be arguable an entity making a payment to an executive officer is not a 'related entity' of the RSE licensee (noting that the concept of 'related entity' is not specifically defined in SIS).
- The degree of detail and historical information ASIC expects for certain prescribed disclosures – particularly where a summary is required – is unclear on the face of the legislation and we suspect that it will take some time for an industry standard on those disclosures to emerge (particularly in the absence of any ASIC guidance).
- There may be practical challenges to timely compliance, such as where internal approvals are required, or where the rules call for disclosure of records from previous financial years. Similarly, to the extent that any information required to be disclosed will originate from a third party, licensees will need to ensure that they will be able to obtain that information (from both a contractual and practical perspective) early enough to take advantage of the 'safe harbour' protection. As always, early attention to these types of potential issues will be key.