Are SMSF trustees ‘wholesale’ clients?

A major industry superannuation funds organisation has sought to have the Australian Financial Complaints Authority (AFCA) declare whether trustees of self-managed superannuation funds (SMSFs) are professional investors.

If AFCA were to define SMSF trustees as professional investors, it would substantially preclude them from accessing the AFCA regime.

In a submission filed with AFCA the Australian Institute of Superannuation Trustees (AIST) said it was seeking clarity from AFCA as to whether, under its operational guidelines, AFCA would not proceed with a complaint from a wholesale client.

In doing so, the AIST submission noted that a wholesale client included the category of professional investors as defined under section 9 of the Corporations Act.

“This includes the Trustee of a superannuation fund whose net assets exceed $10 million,” the submission said.

“AIST seeks confirmation that this will include SMSFs that have net assets that exceed $10 million. AIST also seeks clarity regarding whether AFCA intends to exercise any discretion in the decision to not proceed with a compliant should the complainant be the trustee of an SMSF but with net assets that are less than $10 million,” the submission said. “This may be due to the level of knowledge and experience exhibited by the Trustee in the investment process strategy.”

Elsewhere in its submission, the AIST has also urged that AFCA determine whether lawyers [paid representatives] privately retained by superannuation fund members are actually acting in the members’ best interests.

It suggested that, as a starting point, lawyers involved in superannuation complaints, particularly around death benefits, should understand superannuation law in relation to the issue.

“Some member funds have raised concerns with AIST that they have been involved in complaints processes where the legal representative may not be acting in the complainant’s best interests,” the submission said.

“The best example of this is where the legal representative is unfamiliar with the application of the Superannuation Industry (Supervision) Act 1993 (SIS Act) in the payment of death benefit claims. Should on the facts of the case the complainant not meet the definition of a dependant under the SIS Act, the use of a legal representative through the complaints process may result in vexatious complaints that unnecessarily draw out the complaints process.”

“Further consequences include unnecessary stress to parties involved in the death benefits process including true dependents of the deceased, and unnecessary use of resources for both the complainant and AFCA.”