This week, regulators took an assertive stance on accountability, putting superannuation trustee expenditure and market conduct squarely under the microscope. APRA and ASIC unleashed a series of reviews and enforcement actions, signalling a non-negotiable focus on member outcomes and board-level oversight. This regulatory crackdown unfolded against a charged political backdrop. Treasurer Jim Chalmers forcefully defended the government’s controversial Division 296 tax on high-balance super accounts as a critical test case for meaningful economic reform, essential for defending the economy against global shocks.
Regulators Bare Their Teeth on Super Spending and Market Conduct
Regulators sent the financial services industry a clear message this week: lift your game. The Australian Prudential Regulation Authority (APRA) fired a significant shot across the bow of the superannuation sector, flagging serious weaknesses in expenditure practices across 14 funds. Following a detailed review, the regulator found poor oversight of spending on marketing, sponsorships, and political donations, warning that trustees must rigorously demonstrate how every dollar spent is in members' best financial interests. The findings suggest a cultural shift is required at the board level to move from a compliance mindset to one genuinely focused on member outcomes.
ASIC was similarly active, continuing its enforcement drive against misconduct. The regulator hit Equity Trustees (EQT) with a $70,000 infringement notice for allegedly making misleading statements about the investment strategy of the EQT Growth Plus Fund. ASIC’s deep dive into the fund’s holdings proved how closely it scrutinises marketing claims versus portfolio reality. In a separate action with broad implications, ASIC put the trustees of union-run redundancy funds on notice, indicating these entities fall within its regulatory remit and must meet their obligations.
The enforcement lens also focused on consumer protection and professional standards. A joint operation led by AUSTRAC identified 90 individuals involved in illicit activities using crypto ATMs, highlighting the growing risks in the digital asset space. On the advice front, ASIC revealed that 4,600 relevant providers are yet to meet the mandatory qualification standards, urging licensees to ensure their advisers are appropriately registered and qualified.
Super Tax and Governance Debates Intensify
The government’s proposed Division 296 tax on superannuation balances over $3 million remained a political flashpoint. Treasurer Jim Chalmers gave the policy “election mandate status”, arguing that the modest change tests the nation’s ability to undertake broader, necessary tax reform. In a podcast interview, Chalmers positioned the measure as crucial for budget sustainability, stating that resistance to the “modest” change was a bad sign for future economic reform needed to fund essentials like the NDIS and defence. He framed the debate as a choice between strengthening the nation's economic foundations and bowing to vested interests.
Meanwhile, a separate battle brewed over superannuation governance. Industry bodies pushed back against APRA's proposals to impose a 10-year tenure limit for trustee directors. Several superannuation bodies cautioned APRA against rigid board composition proposals, arguing it could lead to a loss of valuable corporate memory and increase costs. The Super Members Council (SMC) advocated for a more flexible, principles-based approach to corporate governance, allowing funds to tailor their board structures to serve member interests best. This stance has gained traction with regulators.
Advice Standards and Consumer Protections in Focus
The Australian Financial Complaints Authority (AFCA) has moved to provide greater clarity on one of the most contentious areas in financial advice: the classification of wholesale versus retail clients. Responding to a notable increase in complaints, AFCA is seeking to clarify how it assesses the validity of wholesale investor certificates for SMSF clients, particularly when trustees may not meet the sophisticated investor test in their own right. The authority emphasised that advisers must ensure their clients fully understand the consequences of losing retail consumer protections and confirmed it would maintain its $10 million jurisdictional limit stance for complaints involving wholesale investors.
The broader complaints framework also came under discussion. The Financial Advice Association Australia (FAAA) has backed a tougher AFCA stance on the role of paid representatives in the complaints process, supporting measures to ensure representatives act ethically and do not exploit the system. This move reflects an industry push to enhance the integrity and efficiency of the dispute resolution scheme. In personnel news, the Australian Banking Association (ABA) announced that former Queensland Premier Anna Bligh will step down as CEO later this year.
Context, Looking Ahead & Takeaways
This week's regulatory interventions mark a significant escalation from the themes of recent months. While the Delivering Better Financial Outcomes (DBFO) reforms and the sustainability of the Compensation Scheme of Last Resort (CSLR) have been dominant narratives, the focus has shifted to direct and forceful supervisory action. APRA's public admonishment of super funds over expenditure moves beyond guidance to demanding demonstrable proof of value for members. Similarly, the hardening political rhetoric around the Division 296 tax signals this will be a defining battleground leading into the next election, overshadowing previous debates on advice reform minutiae.
Looking ahead, the industry should brace for continued scrutiny. The legislative battle over the Division 296 tax will intensify as it is introduced to Parliament, while APRA is expected to finalise its superannuation governance standards. ASIC will likely maintain its assertive enforcement posture, with a continued focus on misleading marketing and licensee standards.
Actionable Takeaways:
- For Product Providers (Superannuation): 0–3 Months: Immediately review all expenditure policies, particularly around marketing and sponsorships, to ensure a clear and defensible link to members' best financial interests can be demonstrated in line with APRA’s stern warnings.
- For Financial Advisers: 0–3 Months: Urgently review processes for classifying wholesale clients, especially SMSF trustees. Ensure file notes and client acknowledgements are robust and clearly articulate the loss of retail protections, as per AFCA’s guidance.
- For Licensees: 0–3 Months: Conduct an immediate audit to verify that all authorised representatives have met the required qualification standards and are correctly listed on the Financial Advisers Register, addressing the 4,600 provider shortfall identified by ASIC.
- For All Stakeholders: 3–12 Months: Prepare for the impacts of the Division 296 tax legislation. Advisers and product providers should model the long-term effects on high-net-worth clients and consider strategies for managing the tax on unrealised gains, a policy the Treasurer has confirmed is central to the reform.
