ACTU accuses APRA of super fund overreach

The ACTU has accused the prudential regulator of straying beyond its purpose and seeking to ‘all but run’ industry super funds.

Unions have accused APRA of trying to “all but run” industry super funds

You can now listen to The Australian's articles. Give us your feedback.

You can now listen to The Australian's articles.

The ACTU has attacked proposed new governance requirements for super funds, citing an “unprecedented” character assessment of potential directors as evidence the prudential regulator is straying beyond its purpose and seeking to “all but run” the funds.

The Australian Prudential Regulatory Authority is proposing to strengthen its governance framework for banks, insurers and super trustees, asserting the changes will help ensure regulated entities are governed by leaders with the skills, experience and character needed for the current complex risk environment.

The proposals include raising minimum standards relating to the fitness and propriety of directors; requiring engagement with APRA on succession planning and potential appointments; and a lifetime tenure limit of 10 years for non-executive directors.

APRA says a fit and proper regime should set and assess a baseline of acceptable behaviour, character and qualifications to be on a financial services board.

It proposes “additional matters” when assessing an individual’s fitness to be a director, including character or regulatory references to evaluate performance in other roles; actual, potential and perceived conflicts of interest; and criminal and conduct records, such as civil contraventions.

Criticising the proposals as “overreach presented without any evidence”, ACTU assistant secretary Joseph Mitchell accused APRA of trying to “all but do away” with the better-performing industry super fund model, whereby workers and employers were represented on boards.

“APRA has strayed far beyond its purpose as a regulator. It is no longer proposing to regulate superannuation funds to ensure they are meeting the interests of members – it is seeking to all but run them,” Mr Mitchell said.

He said APRA was seeking to empower itself to intervene in the running of funds through imposing its own subjective assessment of directors’ suitability, including its own view of the reputation of fund directors or their ­organisations.

“APRA proposes an unprecedented character assessment of potential directors, which is not present across any other corporate director requirements,” he said. “Opaque ‘character’ assessments have long been used to keep those who don’t fit in the ­private school non-executive director club out of boards.”

He said APRA had increasingly made its disapproval of representative governance and member-representative directors apparent through its interventions “and these new recommendations do the same”.

“The regulator’s proposals today stand in stark contrast to its reaction when bank-owned for-profit super funds stole from the dead and charged fees for no service, exposed by the banking royal commission,” he said.

“APRA has suggested an approach which is entirely inconsistent with the principles of best practice regulation and the rest of corporate Australia.”

APRA chair John Lonsdale said last week that while overall standards of governance had improved over recent years, “we still see areas of weakness, including entities treating compliance with some requirements as a box-ticking exercise”.

“The boards of banks, insurers and superannuation trustees have enormous responsibilities when it comes to protecting the financial interests of households and businesses,” he said.

“Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses and failures. It is no coincidence that almost 80 per cent of entities subject to heightened risk-based APRA supervision have underlying governance problems.”

Mr Mitchell said member-­representative directors better prioritised members’ needs and delivered more for them.

“The same is true for employer directors, representing and gov­erning the system to ensure rigour and transparency at all levels.”