Proposed refinements to choice product dashboard & portfolio holdings disclosure for super funds
4 February 2016
In welcome news for Australian superannuation funds and their investment managers, the Australian Government has released exposure draft legislation to refine the frameworks for 'choice' product dashboards and portfolio holdings disclosure for superannuation funds.
The release is a response to concerns about compliance costs for the superannuation industry and the complexity of the current disclosure regime which led to a deferral of the commencement date.
The requirements are currently proposed to come into effect on 1 July 2016 and the trustee of a registrable superannuation entity (RSE) (other than a pooled superannuation trust) will be required to:
- make a product dashboard providing certain information about "choice" products publicly available on its website (these requirements currently already apply to MySuper products); and
- report details of portfolio holdings twice annually (at each reporting day of 30 June and 31 December) on its website, within 90 days of the reporting day.
The draft legislation proposes to:
- limit choice product dashboard to a superannuation fund's top ten investment options, as measured by funds under management, instead of all investment options;
- limit disclosure of a superannuation fund's portfolio holdings to assets that the fund, or an associated entity, has directly invested in, instead of requiring disclosure for all fund assets on a 'look-through' basis with respect to multiple levels of investment. The obligations to include information about financial products or other property that non-associated entities have directly invested are proposed to be repealed;
- allow a superannuation fund to choose not to disclose up to 5% of the assets attributable to each investment option, which provides flexibility to exclude from disclosure a limited number of investments considered to be commercially sensitive; and
- repeal the reporting obligations on parties to contracts and arrangements that acquire a financial product using the assets, or assets derived from assets, of an RSE.
The easing of a trustee's portfolio holdings obligations so that they are limited to the first investment by the fund in a non-associated entity or by associated entities may facilitate super fund investment in certain funds where public disclosure of underlying investments and values is commercially sensitive, for example, hedge fund investments.
The proposal also means that parties to contracts and arrangements in relation to the acquisition of a financial product using assets derived from a super fund (which may include investment managers in some circumstances) would not have a legal obligation to inform investee entities that the assets invested derived from a super fund or to report information to super funds for portfolio holdings disclosure purposes.
As some superannuation funds may also have sought to oblige investment managers, under their investment management agreements, to provide reporting to the fund to assist with the portfolio holdings disclosure obligations, the proposal may also ease compliance obligations for affected investment managers.
The Government is seeking to introduce legislation in early 2016 with effect from 1 July 2016. More information can be found here.
Henry Davis York is part of an industry working group which has provided feedback on the consultation for the draft legislation.