The Australian Prudential Regulation Authority (APRA) today outlined the criteria superannuation funds had to satisfy to gain a license under its compulsory new standards for industry, while emphasising that the burden of maintaining the license lay with fund trustees.

Under the Governments announced policy on superannuation reform, all APRA-regulated superannuation funds will require a license. This requirement is consistent with the current licensing conditions for banks, building societies, credit unions and insurance companies.

Speaking at the Australian Superannuation Funds Association (ASFA) National Conference in Brisbane, APRAs Executive General Manager, Mr Charles Littrell, said that there are three important questions APRA will ask super fund applicants during the licensing process.

"First, are all the responsible persons associated with the application fit and proper? Second, is the risk management plan for the fund sound and likely to be carried out in practice? Third, are all outsourcing arrangements sound? A "no" to any of these questions will at best delay and at worst finish a licence application," Mr Littrell said.

APRAs fitness and propriety assessments will be based on past and present business qualifications, track record and expertise. In equal representation situations, APRA will consult with industry and the public on basic and continuing training with the intention of moving super fund trusteeship from the potential realm of the well-meaning amateur to a more professional basis. Superannuation fund trustees will be responsible to APRA for policing fit and proper requirements.

Mr Littrell said that APRA viewed the risk management plan as the core document in the license application and in the ongoing supervision process.

"This document must be lived in fact; material adherence to the plan will be an APRA requirement for on-going licensing," he said.

"On outsourcing, APRA is neutral as to whether a fund outsources funds management, administration and other functions. We have no desire to regulate these providers but we may need to assess their suitability with some regularity."

As part of the licensing process, APRA will also provide guidance on appropriate insurance for superannuation funds.

Mr Littrell said that while APRA did not intend to make the licensing application a public document, the regulator believed that the application information should be provided to existing and potential fund members.

"Over time, we may also provide more data to the public to help them with the information disadvantage most super fund members face when making retirement savings decisions," he said.

Mr Littrell added: "APRA now supervises on the basis of proactive scepticism. That is, we are prepared to accept that a regulated entity is managed by honest and competent people and that our beneficiaries are safe as a result. This acceptance, however, must be built on the entitys continuous demonstration of sound position and management. The burden of proof is on management."

In summing up, Mr Littrell said that the bottom line for reforming superannuation is two fold.

"First, by 2005, amateur hour will be over in superannuation management," he said. "Secondly, APRA now has the tools it needs to reduce the risks facing fund members and to help fund members understand how these risks are managed in a given fund."

A copy of Mr Littrells speech and presentation are available on the APRA website at www.apra.gov.au

APRA is the prudential regulator of the financial services industry including banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It currently regulates $1.5 trillion in assets for 20 million Australians.