The decision by APRA follows an investigation into matters referred to it by the financial services royal commission in February 2019.

In a public statement, APRA stated that the the royal commission had formed the view that “CFSIL’s decisions not to bring the migration of certain cohorts of its FirstChoice members into MySuper products forward from just prior to the legal deadline, and to grandfather certain fee arrangements, may not have been in its members’ best interests”.

While APRA stated it has not concluded that CFSIL breached the Superannuation Industry (Supervision) Act 1993, its investigation raised concerns about the adequacy of CFSIL’s internal processes for demonstrating how members’ best interests were considered and prioritised.

“As a result, APRA will impose a licence condition requiring CFSIL to record how it considers members’ best interests and members’ priority covenants when making decisions that materially affect their interests,” said the prudential regulator.

“This measure will improve CFSIL’s practices and also ensure APRA is better able to assess whether members’ best interests are being sufficiently considered and prioritised by CFSIL in future.”

APRA noted that CFSIL did not oppose the application of the new condition, which comes into effect immediately.

APRA has also issued directions and imposed a new licence condition on Suncorp Portfolio Services Limited after investigating the registrable superannuation entity (RSE) licensee’s delay in transferring members into its lower fee MySuper product until just before the legal deadline.

“While APRA’s investigation did not conclude that SPSL breached the Superannuation Industry (Supervision) Act 1993, the investigation raised concerns about the adequacy of SPSL’s internal processes for demonstrating how members’ best interests were considered and prioritised,” APRA stated.

To address its concerns, APRA has also imposed a new licence condition on SPSL, requiring it to document how it considers and prioritises members’ interests when it makes decisions that materially affect their interests.

“This measure will improve SPSL’s decision-making processes and also ensure that APRA is better able to assess whether members’ interests are being sufficiently considered and prioritised by SPSL in the future,” APRA stated.

APRA said it has also issued directions to SPSL requiring it to obtain independent expert verification of the analysis and methodology that will be used to determine the remediation of members affected by the delay in transferring to MySuper products. It will also need to notify affected members of the remediation plan and make a public statement in respect of the plan. 

Commissioner Kenneth Hayne also referred SPSL’s payment of tax surpluses to Suncorp Life to APRA to consider, the prudential regulator noted.

“APRA will be considering this issue further as part of a broader thematic review into trustee reserving practices in the superannuation industry, before deciding what further action may be necessary,” it stated.