Decision to refuse to consider any further RSE Licence Applications
EXPLANATORY STATEMENT
Issued by the authority of the Australian Prudential Regulation Authority (‘APRA’)
Superannuation Industry (Supervision) Act 1993, subsection 29CB(3)
Legislative background
Part 2A of the Superannuation Industry (Supervision) Act 1993 (the ‘SIS Act’) provides for the licensing of trustees of APRA-regulated superannuation entities (‘registrable superannuation entities’). These comprise regulated superannuation funds (other than self-managed superannuation funds), approved deposit funds and pooled superannuation trusts.
An application for a licence (defined in section 10 of the Act as an ‘RSE licence’) may be made by a trustee that is a constitutional corporation, or by a group of individual trustees (see section 29C of the SIS Act).
The SIS Act provides for a licensing transition period, which commenced on 1 July 2004 and ends on 30 June 2006.
A distinction is made in the licensing provisions between a person who was trustee (or is member of a group of individual trustees one or more of whom was a trustee) of a registrable superannuation entity at the start of the licensing transition period (an ‘existing trustee’) and a person who first became trustee (or group of individuals all of whom first became trustees) after the start of that period (a ‘new trustee’).
Under section 29J of the SIS Act in its current form, only a new trustee is required, as a general rule, to hold an RSE licence.
However, on 1 July 2006 an amendment to section 29J will come into force which will have the effect that existing trustees must have an RSE licence by that date.[1]
In addition, existing registrable superannuation entities (that is, the fund or trust itself as distinct from the trustee) must be registered under Part 2B of the SIS Act by the end of the licensing transition period, if the entity is to continue accepting contributions.[2] Under section 29L of the SIS Act, only a trustee with an RSE licence can apply to have a superannuation entity registered.
Section 29CB of the SIS Act makes provision in respect of the period during which APRA must decide applications from existing trustees in the licensing transition period.
Subsection 29CB(2) provides that, subject to subsection 29CB(3), APRA must decide an application for an RSE licence before the end of the licensing transition period if the application is received by APRA during that period and it is from an existing trustee.
Subsection 29CB(3) provides that, at any time in the last 6 months of the licensing transition period (that is, at any time on or after 1 January 2006), APRA may refuse to consider under subsection 29CB(2) any further applications for RSE licences that are received by APRA during the balance of the licensing transition period.
The Explanatory Memorandum to the Superannuation Safety Amendment Act 2004, which inserted section 29CB (and the licensing and registration provisions generally) in the SIS Act, noted:
In combination, these provisions are designed to encourage existing trustees to make early applications for RSE licences and provide APRA with flexibility to manage peaks in the flow of applications, in particular towards the end of the licensing transition period.
Subsection 29CB(5) provides that if APRA makes a decision, under subsection 29CB(3), to refuse to consider an application, that application is taken, at the end of the licensing transition period, to have been received by APRA immediately after the end of the licensing transition period. As a result, if the existing trustee still wishes to pursue the application, APRA will have 90 days after the end of the licensing transition period to decide the application (subject to a possible 30 day extension) under section 29CC of the Act.
The licensing process and consultation
In the first eighteen months of the transition period (i.e. 1 July 2006 to 31 December 2005), APRA drew trustees’ attention to the power under s 29CB(3) in nearly three hundred forums and numerous press articles. APRA staff have been in regular contact with the trustees for which they have supervisory responsibility throughout the period reminding them of their obligations. In the final three months of 2005, APRA wrote to those trustees likely to be affected by the decision on three occasions drawing their attention to s 29CB(3) and encouraging them to complete an application if they intended to remain in the superannuation industry.
APRA wrote again to relevant existing trustees on 18 January 2006 foreshadowing a decision under s 29CB(3) to refuse to consider applications received after 17 February 2006 and urging them to make their applications by that date if they wished to become licensed. At that time approximately 10 trustees had indicated that they intended to apply for a licence but had not yet done so (in addition, APRA proposed to licence 4 APRA-appointed acting trustees, who had not at that time applied).
The letter provided trustees who had not yet applied the opportunity to comment, before the decision was made, if they felt the decision to be made would be unreasonable on them.
No comments had been received as at 2 February 2006 when the Decision to refuse to consider any further RSE Licence Applications (‘the Decision’) was made. A further 2 licence applications had been received by that date, as well as notice from 2 others that they did not wish to apply for an RSE licence. It is likely that additional applications (probably no more than 10, including the 4 acting trustees) will be received between 2 February 2006 and the cut-off date of 17 February 2006.
At the date of the Decision, APRA had 237 licence applications requiring consideration before 1 July 2006 (these are in addition to the 80 licence applications that had already been processed by that date). Fifty four percent of the 237 applications were received on or after 1 December 2005, largely as a result of APRA indicating that it would impose a cut-off date, with the average length of consideration of these applications by APRA likely to be 10 weeks. As noted above, these must be processed before the licensing transition period ends on 1 July 2006.
The Decision will enable APRA to allocate resources in an efficient way to the processing of these applications.
The Decision
The Decision is made in exercise of the power in subsection 29CB(3). It will take effect from 18 February 2006.
Accordingly, an application received from an existing trustee on or after 18 February 2006 will not be considered until after the end of the licensing transition period.
However, all applications received by APRA before 18 February 2006 will be considered before 1 July 2006, as contemplated by subsection 29CB(2).
[1] See section 3 and Schedule 1 Items 72 to 75 of the Superannuation Safety Amendment Act 2004.
[2] See regulations 4.10A, 4.11A and 7.03A of the Superannuation Industry (Supervision) Regulations 1994, as amended from 1 July 2006 by regulation 3 and Schedule 2 Items 4, 5 and 10 of the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 3).