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Registrable Superannuation Entities forced to retire as Responsible Entities by 1 July 2020

February 17, 2020

An urgent “to-do” list has been sent to the superannuation industry following the Hayne Royal Commission[1]. A new draft package of bills, including the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020:  RSE licence condition – no other duty (the “Bill”), requires Registrable Superannuation Trustees (“RSEs”) to cease acting in any other capacity other than with the sole focus on discharging their duties as an RSE. This affects many RSEs who have used the same corporate entity as both RSE (within the superannuation system) and as responsible entity (“RE”) for the operation of non-superannuation funds.

The Bill implements the Hayne Royal Commission’s recommendation that RSEs should be prohibited from assuming any obligations other than those arising from or in the course of their performance of the duties of a trustee of a superannuation fund. Hayne’s report said of the conflicting duties between an RSE and RE:

“Taking on those obligations [acting as RSE and RE] may be seen as yielding some commercial convenience for the group of companies concerned. But those considerations do not outweigh the practical consequences for the trustee’s performance of its duties to its members”.

The Royal Commission highlighted that organisations had failed to ensure decisions were made for the benefit of clients. Simply creating structural segregation may not solve the issue, particularly if it is just done for optics. Governance bodies must always address tough decisions wearing the right hat or avoid conflicted situations altogether. Independent responsible entities can enhance governance outcomes and support a better framework to take care of other people’s money.

Another Bill in the package also requires that RSEs must have appropriate dealing authorisations on their AFSLs by 1 July 2020 if they have been relying on existing exemptions. This will largely be an administrative process for RSEs but will inevitably take up further resources within ASIC’s stretched AFS licensing team.

Can we help you?

If you would like to discuss this article, please call Rupert Smoker on 02 8866 5154 or email Rupert.Smoker@EvolutionTrustees.Com.Au

[1] Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

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