ASIC chair Joe Longo has acknowledged that directors of superannuation trustees have “the toughest gig” as far as board duties go, with funds’ exceptionally complex governance needs surpassing those of corporate Australia.
As big super funds’ assets and influence grow, so does the scrutiny of the sector. Compared to a decade ago, trustee boards now need to perform a wider scope of functions such as balancing operational priorities, negotiating the political process and managing regulators’ expectations.
Speaking at an Australian Institute of Company Directors (AICD) governance event in Melbourne, Longo said if an individual accepts appointment as a director on a super fund’s trustee board, they should expect to be held to “very high standards”.
“I think in many ways, being a director of a superannuation trustee is the toughest gig,” he said.
“You’re not only dealing with ASIC, you’re also dealing with APRA. And the demands and requirements of directors of superannuation trustees are actually quite elaborate.
“It’s been an enforcement and regulatory priority of ASIC…to look at member outcomes and really focus on what’s in the best interests of them and the services they’re getting.
“To my mind, the superannuation trustees have a way to go.”
These comments came as the Financial Accountability Regime (FAR) is set to kick in for insurance and superannuation entities from March 2025. Set to be jointly administered by ASIC and APRA, FAR will require relevant directors and senior executives of RSEs (known as “accountable persons”) to act with “honesty and integrity” and with “due skill, care and diligence”.
Those who fail to perform their governance duties also now have a lot more to lose, as an accountable person who is convicted of an offence under FAR can be disqualified by the regulators from being a trustee, actuary or auditor of a superannuation entity.
“I think the regulatory settings are about right around this [accountability issue]. We now expect the superannuation trustees, the directors and senior management to take this all very seriously,” Longo said.
“All of us in Australia have, frankly, a direct interest in the success of this endeavour… so this is a totally non-trivial subject.”
Longo acknowledged that Australia has a very complex regulatory system, but “there’s no way around that”. As a regulator, he said ASIC does worry a lot about the dynamics between different rules and legislation.
“There’s lots of regulatory guidance. One of the challenges for us is, frankly, keeping it updated,” he said.
Taking the latest climate-related disclosure rule as an example, Longo said ASIC recognised it’s “the most challenging thing in a generation that we’re asking directors to deal with”.
“But you know what, it’s a bit like that for the regulators, too,” he said.
The breadth of directors’ duties outlined under the Corporations Act might be interpreted as vagueness, Longo said, since its principles-based approach doesn’t specifically tell board directors what to do.
“But I think the reality is, that this principles-based approach is the key to a director finding that right balance,” he said.
“Running a business necessarily involves judgement. And judgement means using high-level principles to help find the best way forward.
“If you’re not ready to be a director, don’t do it.”
