Legal Practice

Consultation on draft Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups (draft SPG 227)

The submission to the Australian Prudential Regulation Authority in relation to the draft Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups (SPG) was prepared by the Superannuation Committee of the Legal Practice Section.  

The Committee acknowledges that trustees can benefit from guidance about the steps to be taken in considering and implementing a successor fund transfer. The Committee agrees that the identification of risks and their effective management will assist Registrable Superannuation Entities (RSE) licensees to meet their legal obligations, but are concerned that the SPG does not accurately describe the legal obligations.

The SPG expresses strong opinions about the meaning of the definition of successor fund (referred to in the SPG and here as the 'SFT test'). This is a question of law which has not been tested in the courts in any meaningful way.

Trustees have a statutory duty under s 52(2)(b) of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) to exercise the same degree of care, skill and diligence as a prudent superannuation trustee would exercise.

This duty of care requires trustees to apply the SFT test strictly and conservatively. In its current terms, the draft SPG may cause trustees to underestimate their legal obligations and therefore expose trustees to complaints and legal action from aggrieved members. The submission sets out the Committee's concerns in detail.

You can read the full submission below.

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