ASIC’s powers changed in 2021 and brought big super into scope

ANALYSIS

By pursuing further legal action against AustralianSuper, the Australian Securities and Investments Commission (ASIC) has sent an even clearer signal to the superannuation sector that it takes its role as a conduct regulator seriously and that superannuation funds are not special.

The reality is, however, that before 1 January, 2021, ASIC’s ability to have pursued AustralianSuper over its alleged failings with respect to its handling of death benefits payments would have been extremely limited.

Indeed, it is arguable that the absence of these ASIC powers and consequent oversight, contributed to the fact that the superannuation funds managed to emerge from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services sector virtually unscathed.

It is worth remembering that the former Coalition Government in the aftermath of the Royal Commission introduced the Financial Sector Reform (Hayne Royal Commission Response) legislation which empowered ASIC to act as the trustee conduct regulator.

• In particular, the legislation increased ASIC’s responsibilities related to consumer protection, market integrity, disclosure and record keeping under the SIS Act
• Increased ASIC’s powers to take action in relation to a broader range of trustee conduct under the Corporations Act and ASIC Act.

ASIC’s decision to legally pursue AustralianSuper is significant because the fund is Australia’s largest industry fund and one which has become an exemplar in terms of in-house investment management and global investment reach.

Also worth noting is that it is barely a fortnight since the Federal Court ordered that AustralianSuper should pay a penalty of $27 million over its failure to merge multiple member accounts.

In its concise statement filed with the Federal Court, ASIC is alleging that:

“ during the Relevant Period, AustralianSuper: (a) took between 4 months1 and 4 years from the date the claim form was returned to pay or decline at least 6,897 claims, in circumstances where AustralianSuper received no objection to the claim (No Objection Claims) 2 including 941 members for which it held a valid binding death benefit nomination at the time of the member’s death (each a BDBN Member);

(b) in respect of at least3 555 BDBN Members and 197 members for which AustralianSuper did not hold a BDBN (Example Non-BDBN Members) (each hereafter a Member), failed to pay the Member’s benefits as soon as practicable after the Member’s death as required by s 34(1) of the SIS Act and reg 6.21(1) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (Regulations);

(c) failed to take prompt and appropriate action to prevent and redress significant numbers of death benefit claims not being processed within a reasonable period and in accordance with the law and its own service levels agreed with Link (SLAs).

Given the years during which superannuation funds appeared never to be in scope for ASIC action it is easy to see why financial advisers hold a cynical view of the regulator’s approach, but the rules and ASIC’s powers have changed.