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Australia Stronger Super: portfolio holdings disclosure - regulation memo
Australia Stronger Super: portfolio holdings disclosure - regulation memo
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Australia Stronger Super: portfolio holdings disclosure - regulation memo

12/03/2018

In 2009, the Australian Federal Government commissioned the “Super System Review”, commonly known as the Cooper Review, in order to make the superannuation system stronger, more efficient, more focussed on members’ best interests and easier to use for employers. Stronger Super is some of the most significant reforms to superannuation since the introduction of the superannuation guarantee charge in 1992

About Stronger Super

In 2009, the Australian Federal Government commissioned the “Super System Review”, commonly known as the Cooper Review, in order to make the superannuation system stronger, more efficient, more focussed on members’ best interests and easier to use for employers. Stronger Super represents the Australian Federal Government’s response to the 2010 recommendations of the review and initiated some of the most significant reforms to superannuation since the introduction of the superannuation guarantee charge in 1992.

The portfolio holdings disclosure (PHD) reforms

The objective of the PHD changes is to improve the transparency of superannuation, by requiring trustees of all Registrable Superannuation Entities (RSEs), to publish information about the fund’s portfolio holdings on the fund’s website twice annually.

However, industry participants have raised concerns that collecting and listing individual fund holdings, potentially thousands of lines of data, would be a costly burden on funds. In addition, it could reveal proprietary investment information and commercially sensitive arrangements, which may not be in the best interests of members.

As a result of industry lobbying, the implementation of the PHD reforms has been deferred four times. In mid-2017, the Australian Securities and Investments Commission (ASIC) advised that it was extending the PHD start dates to issue the relevant legislation and regulations. In addition, ASIC stated that the deferrals will help the industry finalise their preparation for the introduction of the reform.

In September 2017, the Government submitted the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 to the Senate. It amends the Corporations Act 2001 (Cth) to refine the requirements for RSE licensees to make publically available their portfolio holdings. According to the Explanatory Memorandum for the Bill, “the purpose of the amendments is to ensure that superannuation fund members, and others including financial analysts, have access to publicly available information about the portfolio holdings of superannuation funds, while minimising the compliance burden on RSE licensees.”

Key reference documents:

  • The Parliament of the Commonwealth of Australia, Senate, 2017, Explanatory Memorandum: http://bit.ly/AUmemorandum
  • The Parliament of the Commonwealth of Australia, 2017, Treasury Laws Amendment (Improving accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017: http://bit.ly/AUbill2017

 Scope

  • Applicable registrable superannuation entities

Industry implications

Under the 2017 Bill currently before the Senate, fund trustees will still be required to publish portfolio holdings on their website twice a year, within 90 days after 30 June and 31 December.

However, two important changes seek to address the concerns expressed by industry participants with respect to disclosure of proprietary investment strategy. The Bill will remove the obligation:

  • to include information about financial products, or other property that non-associated entities have directly invested
  • to report on parties who acquire a financial product using the assets of an RSE, or the assets derived from assets of an RSE

​BNP Paribas Securities Services’ view

BNP Paribas views PHD as a positive step towards increased investment transparency for fund members. However, it remains to be seen whether the level of holdings granularity will be consumed and taken into account by members in their future investment decisions. Additionally, the collection and publication of this data will place additional operational and cost burdens on fund trustees and service providers and the increased compliance costs may need to absorbed by the fund or potentially passed on to members.

Further, fund trustees will need to diligently organise their operational processes to compile and disclose accurate holdings data and meet the required deadlines. BNP Paribas, as a significant service provider to the funds industry aims to develop a standardised template, in conjunction with the Australian Custodial Services Association (ACSA), to deliver the required data to superannuation clients to enable them to meet these requirements.

Key dates

Q1 2018 - Pending Senate Approval and Royal Assent: amended Corporations Act 2001 (Cth) to refine the requirements for RSE licensees

31 December 2018 - Publishing of required information must be made available on the funds’ website within 90 days

Thereafter - The required information must be published on the funds’ website within 90 days after 30 June and 31 December

Download the regulatory memo:

img_bp2s_reg-memo-stronger-super_cover_2018-03-12.png

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