AustralianSuper, the trustee of Australia’s largest superannuation fund, is to pay a A$27m fine after the country’s Federal Court today (21 February) found that it failed to merge multiple member accounts.
The court held this to be a breach of the fundamental duties and obligations AustralianSuper owed to its members, and that it was “inexcusable” for Australian Super not to have had the processes and systems in place to ensure compliance.
In her judgment, Justice Hespe said: ‘AustralianSuper’s failures to comply with s 108A for almost nine years after the section came into effect, to identify its non-compliance and to take steps to remedy that non-compliance were systemic failings and as explained above, were the result of failing to have appropriate systems and processes in place. The failures should not have happened. The failures are serious and highly concerning.’
ASIC deputy chair Sarah Court said: ‘This penalty reflects the severity of the misconduct by Australia’s largest superannuation fund which betrayed the trust of its members and did not act in their best financial interests.
‘This was exacerbated by a systemic failure to escalate and remediate the issue once it was identified.
“Improving services to superannuation fund members is a strategic priority for ASIC and we will continue to take strong action where we consider that members are not getting the service they deserve from their superannuation trustees.”
In the period 1 July 2013 until 31 March 2023, approximately 90,700 AustralianSuper members had multiple accounts that should have been merged. These members incurred approximately $69 million in losses through multiple administration fees, insurance premiums and lost investment earnings.
All affected members have been remediated.
Justice Hespe also said: “It is inexcusable for [AustralianSuper] to not have had processes and systems in place to ensure compliance with a specific legislative requirement… Its systems also failed to ensure that repeated human errors in relation to the failure to merge the multiple accounts were prevented or promptly identified and corrected.”
Justice Hespe further said that the contraventions “involved a breach of the fundamental duties and obligations AustralianSuper owed to its members…’
“…Issues were not escalated [within AustralianSuper] and senior management oversight was absent, resulting in the dereliction of a fundamental regulatory obligation intended to further the best interests of members. Under-resourcing and a failure to prioritise compliance with s 108A of the SIS Act resulted in unacceptable delays.…
“Some of the internal correspondence… suggested that some within AustralianSuper lost sight of the fact that AustralianSuper was required to act in the best interests of individual members when considering the merger of multiple accounts, rather than seeking to hold on to as many accounts as possible. Such correspondence is demonstrative of a lack of appreciation of the gravity of the conduct and a fundamental lack of understanding of the obligations and duties of AustralianSuper.”
This was the first case that ASIC has brought in its capacity as a co-regulator with APRA alleging contraventions of section 52 of the Superannuation Industry (Supervision) Act 1993 (Cth).
