Compliance

"Strong, targeted enforcement action" on superannuation funds

BY , , , ,   |  

With the compulsory superannuation regime and seemingly endless growth of retirement savings in Australia, it comes as little surprise that superannuation funds have and will continue to face increased scrutiny in 2024, with ASIC making its position clear that it will look to take "strong, targeted enforcement action".

At the same time, ASIC also stated that its increased focus on the best interests of members in the superannuation sector was part of its continuing work to ensure better consumer outcomes in the sector. Its focus reflects the increased scrutiny of superannuation funds in recent years, as both regulators and members seek to hold trustees accountable for potential breaches of their legal and trustee obligations.

ASIC's media release is a timely moment to pause and reflect on the recent notable enforcement, regulatory and class actions in the sector.

Greenwashing

It is no secret that ASIC has been heavily focused on alleged greenwashing, particularly in the superannuation industry It will be interesting to see whether and, if so, how, any class actions will seek to monetise alleged greenwashing by superannuation trustees or other entities.

The traditional paths to pursue a class action claim are difficult, because it is not immediately apparent what financial loss is suffered by a member or investor who was misled and proceeded to place their funds into a 'non-green' investment. Indeed, the 'non-green' investment may have outperformed a 'green' investment. Those interested in pursuing such claims are creative, and we envisage they will likely wait for the outcome of the three current ASIC proceedings to see how the law settles, before bringing a claim themselves.

The penalty hearing for the first greenwashing proceeding was on 7 December 2023, before Justice Horan. The market is watching closely to see what penalty is imposed by the Court.

ASIC will continue to crack down on alleged greenwashing, with this once again being a standalone enforcement priority for the coming year.

Civil penalty proceedings commenced for alleged failing to merge members' accounts

In September 2023, ASIC commenced civil penalty proceedings in the Federal Court against a superannuation trustee for allegedly failing to merge the accounts of members with multiple member accounts over a period of almost 10 years. Various allegations are made, including in relation to the superannuation trustee not acting efficiently, honestly and fairly and being in breach of its trustee duties.

It is alleged that approximately 90,000 members are affected, costing members approximately $69 million in losses through multiple administration fees, insurance premiums and lost investment earnings on those amounts. The matter is currently case managed by Justice Hespe. The superannuation trustee has responded to ASIC's concise statement and the parties are required to file a statement of agreed facts with the court by mid-February 2024.