CLIENT UPDATE 12 August 2010
APRA’s New Prudential Practice Guides Summary Following its dialogue with industry under the consultation package titled Guidance for superannuation licensees: Capital, Risk management, Adequacy of resources, Fitness and propriety propriety, APRA has now released ﬁnal form Prudential Practice Guides (PPGs) on those subjects. APRA has also released a Response to Submissions paper which addresses the main issues raised in submissions under the consultation package and APRA’s responses to them.
In August last year, APRA released a consultation package titled Guidance for superannuation licensees: Capital, Risk management, Adequacy of resources, Fitness and propriety. The package contained a discussion paper and four draft PPGs dealing with each of the four subjects addressed in the consultation package. APRA received six submissions in response to the consultation package. The main issues raised in the submissions and APRA’s response to them are set out in APRA’s Response to Submissions - Guidance for superannuation licensees: Capital, risk management, adequacy of resources and ﬁtness and propriety which was released this week and is available on APRA’s website. The ﬁnal form PPGs, which replace APRA’s previous guidance on the subjects addressed in the consultation package, have also been released. They are: • • • •
Superannuation Prudential Practice Guide - SPG 110 - Capital; Superannuation Prudential Practice Guide - SPG 200 - Risk Management; Superannuation Prudential Practice Guide - SPG 230 - Adequacy of Resources; and Superannuation Prudential Practice Guide - SPG 520 - Fitness and Propriety.
How does the Cooper Review affect these PPGs? The recommendations in the Cooper Review include amending the SIS Act to grant APRA prudential standards-making power for the superannuation industry (see the Cooper Review Recommendation 10.2). The Cooper Review also made recommendations on the subject matter of these PPGs. If the Government proceeds with the Cooper Review recommendations, APRA will in due course prepare prudential standards on the matters covered by these PPGs which may differ in the detail from these PPGs. However, for the time being, APRA has issued updated PPGs that reﬂect its existing policy positions. The draft PPGs on management of conﬂicts and reserving practices also issued for consultation in 2009 will be further reviewed subject to any Government response to the Cooper Review’s recommendations on those subjects.
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What should Trustees do? While PPGs are not enforceable, the guidance in them reﬂects APRA’s views and expectations on sound practice and on how trustees may comply with the requirements under the SIS Act and SIS Regulations. APRA has emphasised that compliance with the relevant legislative and regulatory requirements remains the responsibility of trustees. Trustees should consider the Response to Submissions - Guidance for superannuation licensees: Capital, risk management, adequacy of resources and ﬁtness and propriety and the updated PPGs and consider how they impact on their existing compliance arrangements. Paul Cleary has considerable expertise in the provision of specialist ﬁnancial services and would be pleased to offer strategic superannuation legal advice.
For more information, please contact: Paul Cleary Partner T: 02 8257 5760 M: 0407 052 170 firstname.lastname@example.org
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