Governing rules taken to contain covenants
(1) If the governing rules of a registrable superannuation entity do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect.
(2) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to act honestly in all matters concerning the entity;
(b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments;
(c) to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries;
(d) where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee:
(i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and
(ii) to ensure that the duties to the beneficiaries are met despite the conflict; and
(iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and
(iv) to comply with the prudential standards in relation to conflicts;
(e) to act fairly in dealing with classes of beneficiaries within the entity;
(f) to act fairly in dealing with beneficiaries within a class;
(g) to keep the money and other assets of the entity separate from any money and assets, respectively:
(i) that are held by the trustee personally; or
(ii) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the entity;
(h) not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee's functions and powers;
(i) if there are any reserves of the entity--to formulate, review regularly and give effect to a strategy for their prudential management, consistent with the entity's investment strategies and its capacity to discharge its liabilities (whether actual or contingent) as and when they fall due;
(j) to allow a beneficiary of the entity access to any prescribed information or any prescribed documents.
(3) In paragraph (2)(b), a superannuation trustee is a person whose profession, business or employment is or includes acting as a trustee of a superannuation entity and investing money on behalf of beneficiaries of the superannuation entity.
Obligations to beneficiaries override obligations under certain other Acts
(4) The obligations of the trustee under paragraph (2)(d) override any conflicting obligations an executive officer or employee of the trustee has under:
(a) Part 2D.1 of the Corporations Act 2001 ; or
(b) Subdivision A of Division 3 of Part 2-2 of the Public Governance, Performance and Accountability Act 2013 (which deals with general duties of officials) or any rules made for the purposes of that Subdivision.
Trustee not prevented from engaging or authorising persons to act on trustee's behalf
(5) A covenant referred to in paragraph (2)(h) does not prevent the trustee from engaging or authorising persons to do acts or things on behalf of the trustee.
(6) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to an investment strategy for the whole of the entity, and for each investment option offered by the trustee in the entity, having regard to:
(i) the risk involved in making, holding and realising, and the likely return from, the investments covered by the strategy, having regard to the trustee's objectives in relation to the strategy and to the expected cash flow requirements in relation to the entity; and
(ii) the composition of the investments covered by the strategy, including the extent to which the investments are diverse or involve the entity in being exposed to risks from inadequate diversification; and
(iii) the liquidity of the investments covered by the strategy, having regard to the expected cash flow requirements in relation to the entity; and
(iv) whether reliable valuation information is available in relation to the investments covered by the strategy; and
(v) the ability of the entity to discharge its existing and prospective liabilities; and
(vi) the expected tax consequences for the entity in relation to the investments covered by the strategy; and
(vii) the costs that might be incurred by the entity in relation to the investments covered by the strategy; and
(viii) any other relevant matters;
(b) to exercise due diligence in developing, offering and reviewing regularly each investment option;
(c) to ensure the investment options offered to each beneficiary allow adequate diversification.
(7) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to an insurance strategy for the benefit of beneficiaries of the entity that includes provisions addressing each of the following matters:
(i) the kinds of insurance that are to be offered to, or acquired for the benefit of, beneficiaries;
(ii) the level, or levels, of insurance cover to be offered to, or acquired for the benefit of, beneficiaries;
(iii) the basis for the decision to offer or acquire insurance of those kinds, with cover at that level or levels, having regard to the demographic composition of the beneficiaries of the entity;
(iv) the method by which the insurer is, or the insurers are, to be determined;
(b) to consider the cost to all beneficiaries of offering or acquiring insurance of a particular kind, or at a particular level;
(c) to only offer or acquire insurance of a particular kind, or at a particular level, if the cost of the insurance does not inappropriately erode the retirement income of beneficiaries;
(d) to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the claim has a reasonable prospect of success.
Covenants relating to risk
(8) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(a) to formulate, review regularly and give effect to a risk management strategy that relates to:
(i) the activities, or proposed activities, of the trustee, to the extent that they are relevant to the exercise of the trustee's powers, or the performance of the trustee's duties and functions, as trustee of the entity; and
(ii) the risks that arise in operating the entity;
(b) to maintain and manage in accordance with the prudential standards financial resources (whether capital of the trustee, a reserve of the entity or both) to cover the operational risk that relates to the entity.