Monthly technical roundup - May 2022

ASIC

Surveillance of super investment switching

On 6 April 2022, ASIC announced that it had written to 23 superannuation trustees outlining their concerns about deficiencies in their conflicts management arrangements relating to investment switching, and requesting they take steps to improve their internal policies and procedures.

ASIC noted that those trustees have committed to implementing a range of changes to better manage their conflicts, including:

• updating and establishing policies and practices to address the deficiencies highlighted by ASIC;
• increasing board-level engagement for greater board oversight, input and direction;
• increasing staff awareness of the policies and their obligations through greater internal communication and training; and
• undertaking an independent review of the trustee’s broader conflicts management framework.
   

Temporary financial advice relief repealed

On 7 April 2022, ASIC announced that it will allow the COVID-19 temporary relief measures to be automatically repealed on 15 April 2022.

The relief measures which were introduced in April 2020 include:

• allowing financial advisers to provide a record of advice (ROA), rather than a statement of advice (SOA) to existing clients who require financial advice due to the impacts of the COVID-19 pandemic; and
• providing financial advisers with additional time to provide clients with a time-critical SOA.
   

Crypto-assets – risk management and roadmap

On 21 April 2022, ASIC released a letter which sets out their initial risk management expectations for all regulated entities that engage in activities associated with crypto-assets, and a policy roadmap detailing APRA and other regulators’ long term approach.

The initial risk management expectations include:

• conducting appropriate due diligence and a comprehensive risk assessment before engaging in activities associated with crypto-assets;
• considering the principles and requirements of Prudential Standard CPS 231 Outsourcing or Prudential Standard SPS 231 Outsourcing when relying on a third party in conducting activities involving crypto-assets; and
• applying a robust risk management control, with clear accountabilities and relevant reporting to the Board on the key risks associated with new ventures.

FSC

Guidance on divesting of Russian assets

On 5 April 2022, the FSC released guidance to assist trustees of superannuation funds with the divestment of Russian assets.

The FSC acknowledged the Government’s strong expectation for superannuation trustees to take steps to divest holdings in Russian’s assets and provided guidance to ensure the divestment occurs in a way that is consistent with the best financial interest of its members, and trustee’s legal and fiduciary obligations.

The guidance covers:

• what constitutes a ‘Russian asset’;
• steps to be taken by superannuation trustees;
• issues in relation to ownership and control; and
• how the investment process will achieve divestment.