Risk Regulatory Update
/APRA finalised remuneration standard
The Australian Prudential Regulation Authority (APRA) has published guidance for the new prudential standard on remuneration for banks, insurance companies and superannuation licensees. The new standards come into effect from 1 January 2023 with heightened requirements on remuneration and accountability to create more balanced incentive structures, promote financial resilience and support better outcomes for customers.
Consultation on remuneration requirements for all APRA-regulated entities
ASIC urges CEOs to review whistleblower policies
The Australian Securities and Investments Commission (ASIC) has written a letter to the chief executives of large companies and super funds encouraging them to review their whistleblower policies to ensure they are complying with the law.
After reviewing some whistleblower policies, ASIC was concerned that most of these policies didn’t address the relevant requirements fully. Whistleblowers may not know if they are protected or be uncertain about what steps to take to speak up.
FSC publishes financial advice white paper
The Financial Services Council (FSC) has published the White Paper on Financial Advice, which sets out a simple regulatory framework to potentially reduce the cost of providing financial advice by up to $2,000 (37 per cent).
The paper suggests a few measures to reduce costs, including raising the threshold of a ‘retail client’ to anyone with assets less than $5 million (up from $2.5 million) and index the threshold to CPI. It is currently not indexed.
The FSC also wants the Safe Harbour steps for complying with the Best Interest Duty scrapped, alongside complex Statements of Advice in favour of a simpler ‘Letter of Advice’. The FSC recommends splitting financial product and advice apart, and removing complex labels for different categories of advice, while moving to sustainable self-regulation by 2030.
The moves will, according to KPMG modelling, reduce the cost of financial advice, saving adviser time when providing advice, and allow more clients to be taken on each year.
Download the FSC White Paper on Financial Advice
FSC banning occupational exclusions in default group life cover within super
The FSC has announced changes to group life insurance provided within superannuation, with a ban on the use of exclusions and restrictive disability definitions if a member works in a high-risk occupation. The changes are in line with the Government’s Your Future, Your Super reforms to protect consumers.
The change comes after stapling was recommended to keep people with their superannuation funds as they move from job to job. This new regime of stapling, however, may mean some consumers are unable to claim on the life insurance cover of their policy due to occupation exclusions in the default group life insurance cover.
The enforceable FSC Standard will apply to all life, total and permanent disability and income protection insurance policies within MySuper and Choice products, while preventing the use of exclusions and restrictive disability definitions for high-risk occupation members.
Trustees can choose not to offer cover to a new member based on their occupation when the member joins the fund, and no premiums will be charged.
