Super Alert – 22 May 2026: AFCA systemic issues insights, ASIC proceeding for alleged failures re First Guardian collapse, APRA system risk outlook
Welcome to the weekly KHQ Super Alert. This week AFCA published its systemic issues insights for the first half of the 2025/26financial year. ASIC brought proceedings for alleged failures in relation to the First Guardian collapse, released its focus areas for 2026/27 financial report reviews, provided guidance on its commitment to easing regulatory burdens and launched a series of webinars to assist with sustainability reporting. Meanwhile APRA published its latest system risk outlook report.
AFCA – Systemic issues insight report published
On 21 May 2026, AFCA published the 8th edition of its Systemic Issues Insights Report outlining the systemic issues identified, and the markers of excellence observed in the first half of the 2025-2026 financial year.
AFCA identified superannuation-specific themes through the period which included:
- systemic issues were observed with respect to the ‘accuracy of benefit calculations and member transaction processing within parts of the superannuation sector’;
- there were ‘systemic weaknesses in the governance of death benefit claim timeframes within parts of the superannuation sector’;
- ‘[delays] in time-sensitive member transactions can arise where operational disruption, system transitions or administrator changes affect service capacity within superannuation funds’; and
- ‘AFCA’s systemic investigations … identified matters where inaccurate communications during the death benefit claim staking process affected consumers’ ability to understand or exercise their dispute resolution rights.’
Additionally, AFCA noted a series of cross-sector themes, including:
- ‘systemic issues arising not from the absence of policies or documented frameworks, but from weaknesses in how those obligations are implemented in practice’;
- ‘[complaint] handling [remained] one of the most significant drivers of escalation to external dispute resolution’;
- major system migrations, digital transformation programs and the introduction of automated decision-making tools were common causes of systemic issues; and
- systemic issues arose where oversight mechanisms of third party service providers did not identify operational weaknesses, system configuration errors or templated communication deficiencies in a timely manner.
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ASIC – Proceedings brought for alleged failures in relation to First Guardian
On 21 May 2026, ASIC commenced civil penalty proceedings in the Federal Court against a superannuation fund trustee ‘alleging failures in care, skill and diligence concerning the decision to allow members to invest in the First Guardian Master Fund (First Guardian)’.
ASIC alleges that the trustee ‘did not obtain critical information before onboarding First Guardian such as its constitution, audited financial accounts or an audit of its compliance plan’. Further, ASIC alleges that the members were allowed to invest 100% of their funds in First Guardian ‘despite evidence it was or may have been illiquid’.
The specific contravention allegations are that the trustee:
- ‘Failed to exercise the same degree of care, skill and diligence as a prudent superannuation trustee would in onboarding the different classes of First Guardian’;
- ‘Failed to act in the best financial interests of members when performing its duties and exercising its powers in relation to First Guardian’; and
- ‘Failed to do all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.’
Click here for details.
APRA – System Risk Outlook released
On 21 May 2026, APRA released its latest edition of its System Risk Outlook report, ‘which provides an overview of risks and vulnerabilities affecting the financial system from the perspective of Australia’s financial safety regulator’.
APRA’s headline takeaways in the report are:
- ‘Australia’s financial system is resilient and well-positioned to support the economy in a downturn’;
- ‘Cyber and technological risks are intensifying, and governance needs to keep pace’; and
- ‘Risks from private credit appear contained domestically but are growing abroad, with potential spillovers to Australia’.
APRA also noted that a heightened area of focus for the regulator is the relationship between the banking and superannuation industries, despite the fact that the ‘superannuation industry accounts for just over 10 per cent of banks’ total domestic funding’.
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ASIC and AASB – Sustainability reporting webinar series launched
On 20 May 2026, ASIC and the Australian Accounting Standards Board (AASB) announced the launch of a series of free online webinars ‘to support entities in better understanding the core concepts underpinning the sustainability reporting requirements’. The first one is on 16 June 2026.
ASIC has also released eight interactive e-learning modules on ‘the foundational concepts behind the sustainability reporting requirements’.
Sustainability reporting requirements will apply to various reporting entities over a number of phases ‘with many companies due to report for the first time after 1 July 2026’.
Click here and here for details.
ASIC – Regulator commits to easing regulatory burden
On 19 May 2026, ASIC released a media release committing to taking further steps ‘towards clearer regulation, expanding digital services capability, streamlining its website, and simplifying regulatory guidance’ following the outcome of its Report 830 Regulatory simplification progress report.
The release highlights ASIC’s continued collaboration with APRA on initiatives to reduce regulatory burden associated with data collection, as part of the Council of Financial Regulators’ work on improving regulation. That collaboration includes ‘strengthening engagement between regulators and industry and reducing inconsistencies in data collection’.
Over the next six months ASIC will prioritise working with APRA and other regulators to ‘streamline and consolidate data requests and support the Government’s law reform, promoting productivity.’
Click here for details.
ASIC – Areas of focus for 2026/27 financial reports
On 18 May 2026, ASIC issued a media release setting out its ‘key focus areas for its financial reporting, audit and sustainability reporting activities in the 2026-27 financial year’. For the upcoming financial year, ASIC will ‘review the financial reports of listed and unlisted companies, registrable superannuation entities (RSEs) and managed investment schemes (MISs)’.
ASIC will review 25 audit files and maintain its focus on listed and unlisted companies and RSEs.
The media release also notes that ‘ASIC has updated its FAQs relating to the review and audit of sustainability reports in response to changes in the law and to address stakeholder questions, and have also provided sustainability reporting relief to related schemes’.
ASIC is continuing to update its ‘register of relief decisions to include ASIC’s decisions on individual sustainability reporting relief applications. ASIC has also shared preliminary observations on lodged sustainability reports. These observations will assist 30 June reporters as they prepare to lodge their sustainability report for the first time’.
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APRA – SIS Act exemption determination registered
On 21 May 2026, the Superannuation Industry (Supervision) Act exemption determination No 1 of 2026 was registered with immediate effect. It exempts ‘a specific class of persons, namely secretaries and management employees with a direct control interest in an RSE licensee of less than 2%, from the requirement to obtain approval from APRA to hold a controlling stake in an RSE licensee in certain circumstances’.
According to the Explanatory Statement, the instrument applies to a narrow class of persons:
- ‘being persons that are an ‘SM Officer’ defined in paragraph 4 of the Schedule to the instrument as being a secretary, or management employee, of a company that has approval under section 29HD of the Act, or is deemed to have approval by virtue of item 14 of Schedule 4 of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019, to hold a controlling stake in the RSE licensee (SM Officer); and
- where that SM Officer:
- acquires a controlling stake in an RSE licensee on or after the date of commencement of the instrument; and
- holds a direct control interest in the RSE licensee of less than 2%.’
The instrument is intended to reduce regulatory burden by seeking to reduce controlling stake applications from ‘SM Officers with de minimis level of shareholdings while ensuring that the intent of the change of ownership and control provisions in Division 8 of Part 2A of the SIS Act is maintained’.
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