In a recent submission to the royal commission, the Australian Prudential Regulation Authority (APRA) defended the current regulatory architecture, stating that under the current structure, APRA’s core mandate is focused on safety and soundness while ASIC’s is focused on consumer protection.
“The regulatory architecture which emanates from this structure may at times be complex, but given the nature of the financial services sector, some degree of complexity is inevitable,” the submission said.
“There are trade-offs between simplicity, on the one hand, and clarity and enforceability, on the other.”
However, it also noted in the submission that some laws, including the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), could be simplified.
This SIS Act, it said, reflects “an accumulation of specific requirements in a piecemeal fashion over time, may in fact be due for an overhaul”.
“The SIS Act could potentially be streamlined, with obsolete provisions removed and other provisions consolidated,” the submission said.
Overall, however, the simplification of laws and regulations is unlikely to “drive materially better practices”, it said.
“As in other countries, Australian laws and regulations have evolved over time with ever-growing layers in response to recurring episodes of community dissatisfaction with particular outcomes, whether prudential or conduct-focused,” it said.
“Although some level of prescription is a necessity for a regulatory framework, complexity often develops in response to requests from regulated institutions for more clarity or to address specific changes in business practices. Simplifying this structure is likely to be no small task, particularly as it is not possible to start with a clean slate.”
At 25 years old, the SIS Act is in need of an overhaul. Much of the modern super rules come out of the ITAA1997 (talk about back to the future) and, the reporting requirements were transferred to Corps Law. Absent the tax laws, the chasm between APRA Funds and SMSFs is large and, an omnibus body of legislation is questionable. (It works for SGC, but even that is getting large and unwieldly).
Unless some common sense prevails, it looks like SMSFs will be permitted to have up to 6 members. Just think of how many provisions will need changing, just to bring that into effect? SISA is scattered with “has fewer than 5 members”, for example.
Already there is a big move to create specific laws and regulations for SMSFs compared to other superannuation entities. A lot tougher and more prescriptive such as section 42A of SISA. Perhaps we need separate codes.