Difficulties meeting the three day turn around for member transfers, a statutory obligation from January 1, 2014, has brought renewed concern at the practicality of super funds coping with regulation.
Graeme Arnott, chief operating officer at First State Super, said that his fund and much of the industry were under “immense pressure” to carry out all the checks and valuations necessary for a three day turnaround.
He said that the previous 30 day limit on member transfers was “far too long”, but that the new limit posed a number of challenges.
Chief among these is ensuring a process that is free from accusation of arbitrage, particularly where some funds such as First State are daily priced and others are weekly priced.
“Any delay in the valuation has an implication. A member can leave our fund quicker than I can sell and repatriate the investment,” said Arnott.
The growing number of funds facing negative cash flow is also a concern, as the speed of transfer would make payments from cash the easiest approach in theory. “Do they have to keep more in cash than they would otherwise do so?” asked Arnott.
He added that an additional risk in funds seeking to make the three day limit, or else issue an explanation to APRA, could be exploited by fraudsters, where a speed rather than background checks was the watchword in transfers.
Difficulties in three day roll overs join a growing number of concerns about the practicality of meeting all new prudential standard deadlines in 2014. Privately, APRA is also understood to accept the difficulty of meeting some of these deadlines.
Currently the product dashboard and portfolio disclosure are the only areas of government review. In its consultation paper Better Regulation and Governance the Treasury stated: “The Abbott Government is mindful that policy changes must maximise benefits to members, whilst minimising the compliance burden on the sector.” It is not known whether the government has any plans to review the three day roll over.
A compliance update will be part of the annual Investment Administration Conference held in Sydney on February 12. More details can be found here https://www.etouches.com/ehome/index.php?eventid=75549&