ASIC falls 80% short on REST rollover prosecution

The Australian Securities and Investments Commission (ASIC) is considering whether to appeal the failure of its case against big retail industry fund REST for allegedly making misleading representations to members over their right to roll-out of the fund.

The Federal Court Judge, Jonathan Beach found that ASIC had failed in its principal claims and dismissed its case against REST.

However, at the same time, the judge ruled that ASIC need only pay 80% of REST’s costs “to reflect the fact that it had succeeded on some questions.

The Federal Court judgement is significant for ASIC because it goes to the question of how superannuation funds treat requests from members to transfer to another fund.

The ASIC action covered a period between March 2015 and May 2018 with the regulator alleging REST made representations to members who made, or were considering making, full balance transfers to another fund that:

• if they remained employed by an employer who made contributions to the Fund (REST employer) and that employer continued to make contributions to REST, they were required to keep a minimum balance of $5,000 in their account with the Fund;
• if they remained employed by their REST employer but their employer was willing to contribute to another fund, members needed an employer declaration stating either the date the employer stopped making contributions to the Fund or confirming the member’s ‘choice of fund rights’ in order to leave the Fund;
• if they were no longer employed by their REST employer, members needed to obtain a separation certificate or confirmation of their termination date from their employer and provide this to REST before they were able to transfer the full balance of their REST account to another super account.

Commenting on the Federal Court decision, ASIC deputy chair, Sarah Court said superannuation portability and choice of super fund were important member rights.

“ASIC brought this action to clarify the law around those rights and to emphasise the critical responsibility of trustees to provide accurate information to their members. Members rely on and trust information they receive from their superannuation fund,” she said.

ASIC said in its background notes that the Superannuation Industry (Supervision) Act 1993 and associated regulations required Rest to process full balance requests within three business days upon receiving specific mandatory information, subject only to some limited exceptions.

“The obligation to process rollovers to another superannuation fund within three days was introduced in 2013 as part of the government’s SuperStream initiative to improve the efficiency of the superannuation system. Prior to this, rolling over and consolidating funds was a lengthy process which often ended in failure.”