In a communication to trustees on Friday, the prudential regulator said it would soon undertake the first performance test for MySuper funds required under the legislation – which commenced from 1 July – and notify funds of their results by 31 August.
“Following the first round of assessments under the performance test, APRA will engage with [funds] considered to be at material risk of failing the test a second time to understand their plans to improve performance, and their contingency plans to deal with the implications of potentially failing the test again,” APRA said.
“These contingency plans would include pre-positioning to be able to give effect to an orderly transfer of members to another fund, if required.”
Under the new laws, funds that fail an annual performance test twice in a row will be prohibited from accepting new member funds.
“Where a [superannuation] licensee is advised by APRA that they have a product that has failed the performance test, they must, within 28 days of receiving this result, give notice in writing to beneficiaries who hold this product that it has failed the performance test,” APRA said.
“ASIC will be checking that communications made by licensees about performance do not mislead members and are consistent with the required format.”
Following uproar from a number of major funds around changes to unlisted asset disclosure rules as a result of the reforms, APRA said it would soon release the results of its thematic review into unlisted asset valuations and consult on proposed changes to Prudential Standard SPS 530 as a result of the findings.
“These reviews have identified areas where standards need to be raised in the industry. In light of the reforms, licensees need to ensure that they can clearly demonstrate how they are managing their investments in the best financial interests of members,” the regulator said.
APRA said it would also soon release the results of its thematic review into fund expenditure, following criticisms from government backbenchers around the apparent largesse of industry fund marketing and media deals.
“This review considered whether certain expenditure was consistent with the sole purpose test, met the duty to act in the best interests of members, and was subject to appropriate governance and oversight,” the regulator said.
“As with investment governance, APRA has identified a range of industry practices that need to be strengthened, especially in light of the YFYS reforms.”
As a follow-up to the review, the regulator said it would look to collect more granular data on what funds were spending their money on as part of its super data transformation program.
