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Thursday, 5 May 1994
Page: 281

Senator FAULKNER (Minister for the Environment, Sport and Territories) (9.38 a.m.) —I table the explanatory memorandum and move:

  That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

  Leave granted.

  The speech read as follows

The Superannuation Industry (Supervision) Legislation Amendment Bill 1994 will amend the Superannuation Industry (Supervision) Act 1993 (the `SIS Act') and the Superannuation (Resolution of Complaints) Act 1993. Those Acts formed the centrepiece of a package of superannuation legislation which received Royal Assent on 30 November 1993 and which gave effect to the new prudential arrangements for superannuation that the Treasurer announced on 21 October 1992.

This bill makes a number of amendments, many of a technical nature, to the abovementioned Acts aimed at further enhancing and refining the operation of those Acts. I now wish to provide an overview of the main amendments made by this bill.

Allowing certain non-bank financial institutions to offer `approved guarantees'

The bill amends the SIS Act to allow certain non-bank financial institutions to offer guarantees required under the SIS Act.

Currently only approved banks and the Commonwealth, States or Territories can offer the guarantees required under the SIS Act. Building societies, credit unions and similar organisations which are subject to supervision under the various State Financial Institutions Codes are considered to be institutions which should also be able to offer the guarantees required under the SIS Act and this bill amends the SIS Act accordingly.

Allowing `in-house' investments in certain non-bank financial institutions

An `in-house asset' is essentially a loan to, or investment in, a standard employer sponsor of the fund (or an associate of such an employer sponsor) and the SIS Act places restrictions, for prudential reasons, on the level of such investments.

The bill amends the SIS Act to treat deposits in certain non-bank financial institutions (which are subject to prudential supervision) in the same manner as deposits in an approved bank with regard to determining if they are `in-house assets'.

Applications for the issue of a superannuation interest and application to become a standard employer-sponsor

The bill amends the SIS Act to ensure that the trustee cannot accept a person as a member of a public offer entity unless that person has applied in the appropriate manner and has received relevant information (determined by the Commissioner) regarding the entity before doing so.

Acquisition of certain assets from members of regulated superannuation funds

The SIS Act imposes a general prohibition on the acquisition of assets from members, subject to a limited exception in relation to funds with less than 5 members (excluded superannuation funds) provided the asset acquired is business real property. The bill amends the SIS Act to ensure that an excluded superannuation fund can only acquire business real property from a member (or relative of a member) if the property is business real property in the member's (or relative's) principal business.

This ensures that the right balance is struck between allowing the acquisition of business real property from members of excluded funds and recognising the dangers (from a prudential, retirement incomes and taxation revenue perspective) in such an approach.

Public Offer Superannuation Funds and Equal Representation

The SIS Act currently requires a standard employer sponsored fund which is a public offer fund to have an independent trustee. The bill amends the SIS Act to allow such funds the option of either having an independent trustee or having equal numbers of employer and member representatives involved in the trusteeship of the fund. This provides funds with greater flexibility in organising their trusteeship while at the same time ensuring that members are protected—in the first instance by having a trustee who is independent and in the second by having direct involvement in the fund via equal representation.

Existing trustee may give notice of retirement

A fundamental principle of the SIS Act is that superannuation entities should be in the control of a single party (the trustees) who take full responsibility for the fund. However, the Corporations Law currently requires that superannuation entities which are public offer entities have dual responsible parties (the trustee and the management company). The SIS Act enables these public offer entities to change to have a single party in control of the fund. In many cases this will involve the trustee retiring and the management company taking over the role of trustee.

The effective and smooth operation of this changeover may be hampered if the existing trustee is required to hold a meeting of beneficiaries before retiring (as the governing rules of some superannuation entities may require). To overcome this problem, and therefore to ensure a smooth changeover, the bill amends the SIS Act to provide that such a requirement in the governing rules of a fund has no effect.

Secrecy Provisions

The bill amends the SIS Act to allow the Minister to approve disclosure of protected information (if it is in the public interest to do so) to the public at large, rather than just to particular members of the public. At the same time the bill amends the SIS Act to ensure that appropriate protection is provided to an individual by only allowing disclosure of information that relates to the private affairs of an individual where such disclosure would not be unreasonable in the circumstances.

Approved purposes of, and payments to beneficiaries in, an approved deposit fund

The bill amends the SIS Act to ensure consistency between related provisions in the Act which deal with the purposes for which an approved deposit fund may be maintained and payments to beneficiaries. This clarifies the existing obligations.

Disqualified persons not to be custodians

The SIS Act currently restricts disqualified persons from being trustees or investment managers of superannuation entities. There is however no similar requirement on custodians. The bill amends the SIS Act to address this problem and ensure that custodians are subject to similar `eligibility' requirements to those applying to trustees and investment managers.

Removal of trustees of public offer entities

The bill inserts a new requirement into the SIS Act to prevent another party from trying to exert undue influence on a trustee by threatening to remove the trustee unless the trustee complies with that party's requests. The amendment ensures that no other party would have the power to exercise such influence by ensuring that, unless the regulations provide otherwise, no person (other than the Commissioner) can remove a trustee of a public offer entity.

Other provisions

More detailed information on the amendments made by this bill and an explanation of those amendments is contained in the Explanatory Memorandum.

The amendments made by this bill have no revenue implications.

I commend the Superannuation Industry (Supervision) Legislation Amendment bill 1994 and present the explanatory memorandum to the bill.

  Debate (on motion by Senator Panizza) adjourned.