Convention says APRA has final say on Cbus independent experts

Mike Taylor

Managing Editor and Publisher

16 August 2024

ANALYSIS

If past convention is followed, then the Australian Prudential Regulation Authority (APRA), not Cbus or BUSSQ, will have the final say on the selection of the “independent expert” to review their board members’ compliance with ‘fit and proper’ and member best interest issues.

There is no shortage of circumstances where financial services businesses have had additional license conditions imposed on them or been required to enter into enforceable undertakings requiring the appointment of “independent experts” with one of the most notable being IOOF in the wake of the Royal Commission.

And in the case of IOOF (now Insignia Financial) a letter from APRA to the company’s lawyers made clear that it was the regulator who would be calling the shots.

“The RSE licensee must appoint an independent reviewer (or reviewers), to be approved by APRA and on terms approved by APRA, to report to APRA every three months,” the regulator’s 2018 letter said.

It went on to say that this reporting requirement would need to continue until APRA considered the relevant Management Action Plan (MAP) had been completed.

In past instances, independent experts have been retained from within the major audit and accounting firms such as Deloitte and KPMG, but the nature of how industry superannuation fund boards are constructed makes the task more complex.

In the case of Cbus and BUSSQ whoever is appointed as the “independent expert” will have to determine not only whether board members nominated by the Construction Forestry and Maritime Employees Union (CFMEU) fulfilled the “Fit and Proper” prudential standard but also whether they had an undue influence on expenditure decisions.

The “Fit and Proper” prudential standard, which APRA updated as recently as June, this year, is problematic in terms of trade union nominees because it dictates that “the fitness and propriety of a responsible person must generally be assessed prior to the initial appointment and then reassessed annually,

The prudential guide says that ultimate responsibility for ensuring the fitness and propriety of the responsible persons of a Registered Superannuation Entity (RSE) rests with the Board of directors.

However, at the same time, prudential guide states that directors of a superannuation fund are, themselves, responsible persons.