Trustees must be prepared for more legislation covering their responsibilities and start raising their educational qualifications now, according to experts from one of Australia’s leading law firms. With the possibility that APRA may be given prudential standards-making power, trustees must be prepared for the Cooper review imposing a listed-company standard of governance on super trustees’ boards, say Michael Chaaya and Christine Maher, partners in the financial services group at Corrs Chambers Westgarth. Trustee duties arise from many sources such as legislation, regulatory bodies and common law, Chaaya and Maher say, and there is considerable overlap.

“There’s considerable merit in establishing a single set of statutory duties which apply to directors of a superannuation trustee board as opposed to having to navigate the complexities of the SIS Act, Corporations Act and licencing obligations – not to mention the growing body of case law dealing with directors’ duties such as James Hardie and ASIC v Rich decisions,” they say. The Cooper Review has suggested there should be regulatory prescription of a certain knowledge and level of skills for all directors within a short period of joining a trustee board along the lines of the UK system.

“This is possibly a step in the right direction and raises the issue of whether APRA needs to be given a standards-making power for superannuation which would give the standards the force of law. If this encourages greater adoption of the fit and proper requirements, then it is likely to modify industry behaviour in a positive way.” The Cooper Review has suggested a choice-architecture model which has many implications for governance, Chaaya and Maher say.

“How will a trustee identify its members and implement the changes and at what cost; can choice exist in an environment where no cross-subsidies exist; what impact will any new capitalisation requirements have?” It may not be plausible for the Cooper review to recommend a listed-company standard of governance on directors of a superannuation trustee board, according to Chaaya and Maher, who were speaking at the CMSF last month in Brisbane. There would be many examples, they say, “where the governance standards applicable to super funds should be lower than those applying to listed companies, for example where members exercise investment choice”.

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