Superannuation Industry (Supervision) Act 1993

Overview

The Superannuation Industry (Supervision) Act 1993 was enacted to address the need for a comprehensive framework to supervise and regulate certain entities within Australia's superannuation industry. This Act was passed by the Australian Parliament, aiming to ensure the prudent management of superannuation funds, approved deposit funds, and pooled superannuation trusts, by providing for their licensing and registration, setting operating standards, and prescribing prudential and data standards. The Act establishes a system for the supervision of these entities by the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Commissioner of Taxation, with a focus on maintaining the integrity of the superannuation system, protecting members' interests, and ensuring compliance with established standards and obligations.

Scope and Application

The Superannuation Industry (Supervision) Act 1993 (the Act) is a Commonwealth law that aims to ensure the prudent management of certain superannuation entities and to provide for their supervision by the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Commissioner of Taxation. The Act applies to regulated superannuation funds, approved deposit funds, and pooled superannuation trusts, which are collectively referred to as registrable superannuation entities (RSEs). These entities include regulated superannuation funds, approved deposit funds, and pooled superannuation trusts, but expressly excludes self-managed superannuation funds (SMSFs). The Act binds the Crown and extends to the external territories of Australia. The Act outlines licensing requirements for trustees of RSEs, establishing standards for the operation of RSEs, and details the responsibilities of trustees and other key personnel, including investment managers and custodians. Additionally, it sets out rules governing the governance, investments, and transactions of these entities, including restrictions on certain investments and the holding of in-house assets. The Act also includes provisions for the notification of significant events to members and the Regulator, and imposes penalties for non-compliance, with certain exclusions and transitional arrangements specified within the Act or in regulations. The Act does not apply to SMSFs, which are governed by separate legislation.

Key Provisions

• The Superannuation Industry (Supervision) Act 1993, as amended, establishes a framework for the supervision of certain superannuation entities to ensure the prudent management of superannuation funds, approved deposit funds, and pooled superannuation trusts. The Act requires trustees and groups of individual trustees to obtain an RSE (Registrable Superannuation Entity) licence from APRA (Australian Prudential Regulation Authority) to manage these entities. Applications for RSE licences must include specified information, and APRA has the discretion to request additional information or approve, vary, or refuse applications. Licences come with conditions, and trustees must notify APRA of any breaches. The Act also mandates the registration of RSEs with APRA and outlines obligations such as holding annual members’ meetings, providing consistent information, and ensuring compliance with prescribed operating standards and prudential standards. Trustees of regulated superannuation funds and approved deposit funds must ensure that governing rules do not prevent compliance with the Act.
• The Act imposes several obligations on trustees and RSE licensees, including the requirement to keep accounting records, to audit and report on the entity’s financial status, and to maintain records of trustee and investment manager changes. Trustees must also establish procedures for appointing member representatives, maintain investments on an arm’s length basis, and report significant adverse financial events to the Regulator. For MySuper products, trustees must obtain authority from APRA to offer these products and comply with specific fee rules. Trustees of employer-sponsored funds must ensure their governing rules do not prohibit reserves to cover operational risks. RSE licensees must ensure that their governing rules do not limit service providers or investments to particular persons or associates.
• The Act includes provisions for offences and penalties. For instance, being a trustee of an RSE while unlicensed or making false representations about one's RSE status are criminal offences, each carrying a maximum penalty of imprisonment for 2 years and/or a fine of 120 penalty units. Failing to notify APRA of a licence condition breach is an offence with a penalty of 50 penalty units. Promoting illegal early release schemes from regulated superannuation funds is a civil penalty provision, with a maximum penalty of imprisonment for 2 years and/or a fine of 120 penalty units. Additionally, contravening certain covenants in the governing rules can result in civil and criminal penalties, including fines and imprisonment. Trustees and investment managers found guilty of certain offences face disqualification from managing superannuation entities. Failure to comply with specified obligations, such as keeping records or notifying the Regulator of significant adverse events, can result in fines of up to 100 penalty units. Disqualified persons who continue to act as trustees, investment managers, or custodians also face criminal penalties.

Legal classification tags

Area of Law

Corporate Law & Governance

Consumer Law

Financial Services Regulation

Instrument

Act

Concepts

Definitions & Interpretation

Regulatory Standards

Licensing & Registration

Enforcement Powers

Compliance Obligations

Prohibited Conduct

Prudential Standards