Impose FAR, ORFR obligations on MISs – Industry funds

Mike Taylor

Managing Editor/Publisher, Financial Newswire

9 March 2026

Industry superannuation funds want the directors of the Responsible Entities (REs) of Managed Investment Schemes (MISs) to be subject to the Financial Accountability Regime (FAR) and therefore liable to account for operational and conduct failures.

The Super Members Council (SMC) has told the Treasury review of Managed Investment Schemes that the recommendation is not made lightly but in the knowledge of the reasons behind the collapse of the Shield and First Guardian funds.

It said that in the case of Shield and First Guardian accountability had been diffused with those centrally responsible not held to account.

“The collapse of Shield and First Guardian exposed a systemic weakness in Australia’s financial services framework,” it said. “Accountability was diffused across advisers, platforms, trustees and Res, with no single party clearly responsible for product suitability or risk oversight.”

The SMC said this fragmentation allowed governance failures to persist unchecked.

It said the subsequent review conducted by the Australian Prudential Regulation Authority (APRA) “reinforced that accountability cannot be outsourced and highlighted the need for clearer, individual responsibility for risk and decision-making”.

The SMC noted that while the FAR now applies to superannuation trustees, Responsible Entities of MISs, despite managing billions of dollars of investor funds and exercising significant discretion over product design, risk management and disclosure remain outside the regime.

“Existing obligations under the Corporations Act focus on entity level duties and lack the personal accountability, transparency and enforceability embedded in the FAR,” it said.

The SMC argued that extending the FAR regime to MISs would also align with the Financial Services Royal Commission’s emphasis on strengthening individual accountability, improving governance standards, and ensuring that responsibility for misconduct cannot be obscured by complex industry structures.

“This reform would deliver a more consistent, system-wide accountability framework and ensure entities entrusted with managing Australia’s’ superannuation wealth are held to the same high standards across the whole super sector,” it said.

The SMC submission also argues that MISs should be subject to strong capital requirements in circumstances where “current arrangements do not provide sufficient assurance that entities holding or directing large volumes of super savings have the financial resilience to withstand operational failures and fraud”.

“SMC recommends that MIS financial requirements explicitly adopt a scalable, risk-sensitive design, similar in concept to APRA-regulated trustees’ operational risk financial requirement (ORFR),” it said.