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SUPERANNUATION INDUSTRY (SUPERVISION) AMENDMENT REGULATIONS 2002 (NO. 1) 2002 NO. 21
EXPLANATORY STATEMENTStatutory Rules 2002 No. 21
Issued by the Parliamentary Secretary to the Treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2002 (No. 1)
Section 353 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) provides that the Governor-General may make regulations prescribing matters required or permitted to be prescribed, necessary or convenient to be prescribed for carrying out or giving effect to the Act, including certain specified purposes.
The purpose of the Regulations is to amend the Superannuation Industry (Supervision) Regulations 1994 as a consequence of the reforms to the regulation of the financial services industry which are included in the Financial Services Reform Act 2001 and associated legislation. The Financial Services Reform Act 2001 amends the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, and will provide:
• a single licensing regime for financial sales, advice and dealings in relation to financial products;
• consistent and comparable financial product disclosure; and
• a single authorisation procedure for financial exchanges and clearing and settlement facilities.
The effect of these amendments is to remove the disclosure requirements from the Act and its regulations and substitute a harmonised regime in the Corporations Act 2001, as amended by the Financial Services Reform Act 2001, and the amended Corporations Regulations. Significant amendments to the Act are made by Items 282 to 328 of Schedule 1 of the Financial Services Reform (Consequential Provisions) Act 2001.
The Regulations:
• omit definitions and Regulations which will no longer be required following the commencement of the Financial Services Reforms;
• substitute new regulations (and individual references) which refer to provisions inserted into the Corporations Act by the Financial Services Reform Act, which will supersede provisions in the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994; and
• make miscellaneous consequential amendments.
Details of the proposed Regulations are set out in the Attachment.
The Regulations commence at the same time as Item 1 of Schedule 1 of the Financial Services Reform Act 2001 commences. This Item has been proclaimed to commence on 11 March 2002.
ATTACHMENT
Introduction
The amendments generally reflect the reduced role for disclosure requirements of the Superannuation Industry (Supervision) Regulations 1994 due to the introduction the disclosure regime for financial products of the under the Financial Services Reform Act 2001 (the FSR Act).
The disclosure regime replaces a range of existing disclosure regimes for financial products, including disclosure requirements for superannuation interests under the SIS Act and its Regulations. In the case of superannuation, this includes:
• point of sale disclosure requirements which are addressed in section 1013D of the Corporations Act (the content requirements for Product Disclosure Statements) and the more detailed information requirements relating to superannuation products in Part 7.9, Division 4 of the Corporations Regulations;
• the requirements for periodic reports and other ongoing disclosure requirements in relation to members' interests, which are provided by regulations made under section 1017D of the Corporations Act, particularly Division 5 of the Corporations Regulations;
• periodic disclosure of the fund's performance which are provided by regulations under section 1017DA of the Corporations Act, particularly Part 7.9, Subdivisions 5.5 to 5.7 of the Corporations Regulations.
A. Omission of definitions and regulations
As a result of the reforms, a number of definitions are no longer required, and are therefore omitted. They are the definitions of 'building society', 'capital guaranteed', 'capital guaranteed fund', 'contact details', 'credit union', 'excluded superannuation fund', 'policy, 'prescribed earnings rate', 'sub-fund', 'sub-plan', 'undefined benefits fund' (in Subregulation 2.01 (1)).
A number of regulations are also no longer required - Subregulations 2.01(4), 2.18(4), 2.19 to 2.21, Regulations 2.05 - 2.07, 2.27 - 2.28, 2.30 - 2.31, 3.09A - 3.09B, 3.10A - 3.13, Subdivision 2.4.2, Divisions 2.2 and 2.3, 2.5, 2.6, 2.6A, 2.7, 2.7A and 2.8.
B. References to the Financial Services Reforms
The following amendments are necessary to refer to the new provisions, inserted in the Corporations Act by the FSR Act, which perform functions previously performed by the SIS Act and Regulations:
• new definitions of 'fund information' and 'fund reporting period' (Regulation 2.17), and 'member reporting period' (Regulation 5.12);
• cross-references in paragraph 5.15(b), 5.17(6), 5.21(7), 6.17(2), 6.28, 6.29;
• to omit references to deleted sections (Subregulation 13.07(2)).
C . Miscellaneous consequential amendments
The miscellaneous consequential amendments:
• substitute a new Regulation 2.29:
- A requirement to provide information in relation to the derivative charge ratio to members of superannuation entities is provided under the Corporations Regulations (see paragraphs 7.9.37(1)(h) & (i)). However, the previous requirement to provide information in relation to the derivatives charge ratio to the Australian Prudential Regulation Authority is considered to be outside the intent of the disclosure regime provided by the FSR Act.
- The specification of how to calculate the derivatives charge ratio has been retained under the Superannuation Industry (Supervision) Regulations 1994.
• substitute new headings for Part 2 ('Information for certain parties') and Subdivision 2.4.3. ('Derivatives charge ratio');
• make an amendment to Subregulation 2.30(4) (to omit references to Divisions which are deleted);
• make an amendment to Subregulation 2.18(2) to bring it into line with the reporting requirements in the FSR regime;
• make an amendment to Subregulation 3.10(1) so that the definition of commission and brokerage is consistent with the disclosure requirements under the FSR regime;
• substitute Subregulation 3.10(3) which will apply restrictions in the payment of commission and brokerage to account for the harmonised licensing regime introduced by the FSR Act, which supersedes the circumstances previously detailed in this subregulation;
• substitute a new Regulation 3.11;
- Regulation 3.11 provides the transitional mechanism for amendments to the restrictions on payment of brokerage and commission under Subregulation 3.10(3), including the operation of a transitional period for the implementation of sections of the FSR Act pertaining to licensing requirements.
- The result of the amendments in this item is that Regulation 3.10 may continue to apply as if in force immediately before commencement of the amendments. However, should the trustee of a public offer entity become a financial services licensee, or if the FSR transitional period ceases the above amendments will apply to the trustee.
• amend Regulation 13.15A:
- the amendment replace the current definition of an approved body contained in Subregulation 13.15A(2) with a new reference to the bodies listed in Schedule 8 of the regulations.
- the amendments also make a consequential amendment to the definition of a derivative contract in Subregulation 13.15A(3). The definition provides that any futures contract or option contract is a derivative contract. As the relevant definitions have been removed from the Corporations Act 2001, the cross-references contained in paragraphs 12.15A(3)(a), 12.15A(3)(b) and 12.15A(3)(c) have been deleted.