As part of an overhaul of Australia’s $1.5-trillion retirement savings sector, super funds are heading into a new era of disclosure and transparency.
Draft regulations released last month reveal the depth and extent of information that the industry regulators want Australian super funds to disclose to their members and the wider public. As one corporate lawyer recently commented, transparency is the new black and regulators are using it more and more as a tool.
The proposed new requirements – which complement the various tranches of MySuper legislation – cover everything from how information is to be displayed on fund websites, and how much trustee directors are paid through to disclosing exactly where members’ money is invested, right down to the individual investment holdings of each fund manager employed by funds.
While certain requirements concerning the disclosure of portfolio holdings appear contentious and are currently the subject of further consultation between the regulator, industry and the government, it’s hard to argue that most of the other new requirements are unreasonable, given the compulsory nature of our super system.
Quid pro quo
It should never be forgotten that super funds hold members’ money in trust and therefore the members should be entitled to know who is managing their money and where they are investing it. Moreover, if super funds expect the public companies they invest in to disclose executive and director remuneration as well as a host of other details on board practices, then surely it is appropriate that they provide similar information about their own boards.
This includes disclosure of board composition – including gender, number of board meetings, attendance, tenure of directors, director biographies and disclosure of the skills and expertise of directors. It is also appropriate that not-for-profit funds will be required to disclose whether trustee fees are paid to the director or to their representative or sponsoring organisation – typically a union or employer group. Similarly, where directors sitting on the boards of retail funds are paid by that fund’s parent company, it is important that this information is disclosed.
Several leading industry funds have recognised the benefits of biting the disclosure bullet and not waiting until the eleventh hour to act.
Case study of success
The chief executive of one such fund spoke frankly at AIST’s Conference of Major Super Funds in Brisbane earlier this year about his fund’s transition to full disclosure and greater transparency. He admitted to the audience that the transition hadn’t been easy and that there was some “discomfort” for a couple of days as the executive team read about their salaries in the newspapers and on the internet as the media rushed to report these figures. But the sky didn’t fall.
Indeed, the move proved overwhelmingly positive for the fund. Its members have a much better understanding of what the fund does, and the fund has been lauded by commentators as a first mover in the area of disclosure. It is also better positioned than most of its peers to deal with the Australian Securities and Investments Commisssion’s new disclosure requirements, due to take effect from the July-1 MySuper start date.
Even if the deadline to comply with these new regulations is effectively 12 months from this date (indeed, the deadline for portfolio disclosure has been moved from six months to 90 days after June 30, 2014), funds shouldn’t underestimate the enormity of the task ahead to collect the information and then disclose it in the required format. In terms of shining a light on industry practices, ASIC has switched on the high beam. Funds need to prepare now or risk being a deer caught in the headlights.