The corporate watchdog has completed its backflip on new regulations on the reporting of superannuation fund fees, announcing it will appoint an independent expert to review the problematic area.
In a release issued on Wednesday afternoon, the Australian Securities and Investment Commission (ASIC) said it would “work with an external expert to conduct a review of the fees and costs disclosure under RG 97 to ensure that it is best meeting in practice the objective of greater transparency for consumers”.
No expert has been appointed to date, but details are expected in the next two weeks. The appointment will be a delicate political balance, as the expert will need to be someone who is acceptable to both the for-profit retail funds and not-for-profit industry and public sector funds.
The move comes after a sustained lobbying campaign from the industry super fund sector and independent experts who were concerned that the regulator’s new fee reporting regime, known as RG 97, would unfairly benefit for-profit retail funds.
David Whiteley, CEO of Industry Super Australia, said: “The decision reflects very well on ASIC. It reflects the fact that there has been concern across the industry about the implementation of RG 97 and the risks that it could mislead consumers.”
Criticism centred around what was seen as a carve-out of disclosure of fees on investment platforms and listed property investment that research house SuperRatings said could result in underreporting of retail fund fee levels.
“The platform might charge 50 basis points to manage but there could be another 50 basis points of costs under that that are not captured,” SuperRatings chair Jeff Bresnahan said when the move was first announced in August.
ASIC initially batted away such concerns, saying that its new regulatory regime would treat all fund types the same way. However, the move to appoint an expert to review the measures signals a change of heart.
ASIC began moving its position some weeks ago, giving industry super funds a 12-month relief period from new rules on property investment costs.
They would have meant direct property investment through pooling arrangements used by industry super funds would have looked more expensive than retail fund investments through listed property vehicles.
ASIC confirmed that resistance in the industry to aspects of its regulatory regime, developed over four years of consultation, was behind its decision to bring in an expert to conduct a review.
The regulator said it was “undertaking these actions in response to feedback from across the industry around challenges with the practical implementation of RG 97”.
The industry fund sector had already moved to change its reporting systems but had been unhappy with the outcome.
“ASIC has been pleased that funds have been investing in improving fee disclosure, but ASIC recognises that accurate fee and cost disclosure is complex to implement, and that this implementation takes time.
ASIC will continue to work with industry to make sure that disclosure works for consumers,” the regulator said in its statement.
An ASIC spokesman told The New Daily that the review process by the expert was expected to be completed in the first half of next year. In the meantime, the spirit of the current regulation will apply.
“ASIC’s oversight of PDS [product disclosure statements] and periodic disclosure will maintain its current facilitative compliance approach, focusing on the key aim of ensuring that consumers are not misled,” the regulator said.