Super funds told they can’t outsource blame

Australian superannuation funds have been told in no uncertain terms that they cannot outsource blame to their service providers.

Both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have left fund executives and trustees in no doubt that they must be responsible for the actions of service providers and contractors.

The message was sent by the deputy chairs of APRA and ASIC, Margaret Cole and Sarah Court who used their addresses to a Sydney forum to underscore that the regulators would not tolerate the outsourcing of blame.

ASIC’s Court referenced superannuation funds falling short on death benefit claims handling and said she “noted some commentary from funds attributing these delays to administrative outsourcing”.

“But this is not an answer to the issue. It is the trustee that has the legal responsibility to ensure it can meet the legal obligations owed to members, irrespective of the administrative arrangements the fund chooses to adopt. The legal obligations on trustees cannot be outsourced,” Court said.

For her part, APRA’s Cole called an end to the days of “set and forget” where superannuation fund service providers are concerned.

“…the days of trustees pointing the finger at a service provider for failures or breaches, which is a behaviour and mindset that APRA has observed from some entities,” she said.

“If you outsource processes supporting any critical operations and something goes wrong in the delivery of service to your members, you remain on the hook.”

“The expectation is that you will understand how the service provider operates in regard to your critical operations, the suppliers it uses, the risk it faces in delivering your critical operations, and how those risks are mitigated,” Cole said.