Post: ASIC’s 2024 enforcement priorities in the superannuation sector

Check against delivery

Good morning to you all.

Thank you for the invitation to be here today. This is an important audience for ASIC to engage with about our enforcement priorities in the superannuation sector for the year ahead.

Before I turn to those priorities, I should acknowledge that this month marks the five- year anniversary of the handing down of the Financial Services Royal Commission report. That was, of course, a seminal time for those involved in the financial services sector, for both the regulated and regulators alike.

ASIC is a very different regulator now than we were a decade ago. ASIC’s remit has substantially increased since that time – we have new laws and new powers, and we are determined to use them to ensure that we do not see a repeat of the misconduct that emerged in the course of the Royal Commission.

Many of those new laws and powers are relevant, of course, to our conduct role in the superannuation sector. We see our role in the sector in broad terms being to drive trustees to improve member outcomes and hold trustees to account where there is misconduct or poor governance.

We have been, and will continue to be, an active conduct regulator in the superannuation sector.

Last year alone we:

Undertook 219 surveillances of superannuation entities (2023 CY);
Took legal action in the courts against four superannuation trustees, being Mercer, Active Super, TelstraSuper and AustralianSuper (2023 CY); and
The courts imposed $29 million in penalties in relation to misconduct in the superannuation sector (2023 CY).
In the coming year, we intend to build on this strong record.

2024 enforcement priorities
We publicly announced our enforcement priorities late last year. We do this for a number of reasons: it provides transparency to our regulated community, it holds us to account for delivering against those priorities, and we have found that the announcement by ASIC of areas of interest to us tends to have an immediate compliance effect.

Our enforcement priorities in the superannuation sector in the coming year run along three key themes:

Member services failures;
Misleading conduct, including greenwashing; and
Failures to protect superannuation balances.
The people in this room, as stewards of Australia’s $2.5 trillion superannuation pool, are in a powerful position to impact outcomes for members.

These themes could be regarded as a call to action – they reflect areas of genuine harm we are still seeing through intelligence and surveillance and should serve as fair warning to the sector as to where it needs to lift performance.

Member service failures
First to member service failures.

Australians have a right to expect to be dealt with efficiently, honestly and fairly by their superannuation fund.

ASIC expects trustees to communicate proactively with members, deal responsibly with members’ money, and deliver good value for money. This is regardless of the phase of membership of the member.

From early accumulation through to retirement and draw-down phase, services and member needs may change across the ‘life’ of the membership, but these core expectations remain. They must be met consistently, which requires operational soundness.

Through our surveillance and enforcement work over recent years it has become increasingly clear that in many cases member services provided by superannuation funds are falling short of these expectations. In particular, we have observed that services are too often slow, unresponsive, and not member focused.

In an example of our concerns in this regard, in November of last year we commenced civil penalty proceedings against TelstraSuper for alleged failures to comply with the internal dispute resolution requirements that came into effect in October 2021.[1] These are the first proceedings we have commenced under this regime.

We allege TelstraSuper failed to respond adequately to two in five complaints within the relevant time period, and failed to operate efficiently, honestly and fairly.

One year before we took this matter to court, we warned superannuation trustees to improve their internal dispute resolution systems, after a review that uncovered sub-standard complaints handling arrangements across the industry.

That we now have a specific enforcement priority for member service failures should serve as a further warning to trustees to improve efforts in this area.

Death benefit claims handling
When individuals have bad experiences with a fund, their confidence in the superannuation system is likely to be undermined.

Nowhere is this more evident than in relation to death benefit claims handling.

We are aware of a significant increase in complaints to the Australian Financial Complaints Authority about extreme processing delays for death benefit claims, among other issues, leading to additional distress for members’ families.

We are undertaking an industry review focused on improving the delivery of superannuation fund member services, looking initially at trustee compliance with obligations related to the handling of death benefit claims.

While I will not comment specifically on investigations underway, we are actively considering these issues and whether they amount to an industry-wide problem.

I note 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. I will return to this theme when I talk about greenwashing.

There has been much written and reported in recent times about the phenomenon of greenwashing, and ASIC has been very active in this area in recent times.

It is important to recognise that greenwashing, of course, is not new. Despite the significant current interest in the issue, what is now referred to as ‘greenwashing’ is of course just misleading and deceptive conduct by another name.

All the actions ASIC has taken to date in this area fall within that general descriptor – that is, all are allegations about firms engaging in misleading and deceptive conduct. This is not to say that our future greenwashing work will be confined to misleading and deceptive cases. It may be that licence obligations, directors’ and officers’ duties and a range of other obligations can be applied here. Again, all existing laws which people are familiar with.

There is of course new law on the horizon, which will entail significant additional and new compliance obligations. But our current focus is on existing laws, which should be familiar to everyone, and ensuring that we maximise their availability to protect potential investors and ensure that investors are getting what they bargained for.

Greenwashing remains a key focus for ASIC in 2024.

With proceedings underway against Mercer Super and Active Super, trustees will be aware that we will use every lever legislation affords us to eliminate this practice, and we will continue to monitor the superannuation sector for misleading greenwashing claims.

Going forward our focus will be on net zero statements and targets made without merit; the use of terms like ‘carbon neutral’, ‘clean’ or ‘green’ that are not founded on reasonable grounds; and the use of inaccurate labelling or vague terms in sustainability-related funds.

We expect boards to engage directly on sustainability claims – whether they are aspirational statements, targets, active stewardship commitments or investment descriptions.

If trustees are making environmental, social or ethical claims to attract potential members, those claims need to be backed with evidence and transparent about their basis.

Failure to protect superannuation balances
Finally, to failures by trustees to protect members’ superannuation balances.

We know that with the increased cost of living, Australians are more worried than ever about having enough money in retirement.[2]

Members should be able to have confidence that their superannuation savings are not being eroded by unnecessary or inappropriate fees and charges, and that the products in which they are investing are designed to maximise retirement outcomes and sufficiently balance risk.

However, some of our recent enforcement actions demonstrate the sector is falling short in this regard.

Last year we commenced civil penalty proceedings against the trustee of Australia’s largest superannuation fund, AustralianSuper, alleging failures to address multiple member accounts.[3]

We allege around 90,000 AustralianSuper members were affected, costing members approximately $69 million in multiple sets of fees and insurance premiums and lost investment earnings on those amounts.

This was the first case we have brought alleging contraventions of section 52 of the Superannuation Industry (Supervision) Act 1993 relating to the conduct of trustee’s duties.

Unintended multiple accounts remain a significant issue for Australian consumers despite reforms designed to reduce their frequency.

It is in the interest of all superannuation funds to proactively identify and consolidate multiple accounts within the fund, where it is in the members’ interest to help their members avoid extra fees and to ensure their funds avoid costly remediation.

We also secured a $5 million penalty against superannuation trustee OnePath for deducting fees from members of Integra Super for advice services they did not receive and misleading consumers.[4]

The court found that between December 2015 and November 2021, OnePath deducted $3.8 million in fees from members for advice services they did not receive.

OnePath told members they had to pay a fee for advice from a ‘plan adviser’ even after the member had been transferred to a division of Integra Super, where they were not entitled to receive advice services.

The role of the trustee
What these cases demonstrate is the important role of the trustee in safeguarding members’ super balances by eliminating poor practices.

Boards that are engaged in their businesses and exercise appropriate oversight are well positioned to identify, address and remediate harms to members before they come to the attention of ASIC. This requires asking tough questions, and prioritising members in decision-making.

Following the Royal Commission, we sought – and received from Parliament – significantly higher financial penalties to provide the strongest possible deterrent to financial services misconduct.

Misconduct post-dating March 2019 now attracts maximum penalties more than tenfold those that existed before – and we are committed to pursuing these penalties through the courts, so the cost of breaking the law well exceeds the cost of doing business.

We have also indicated publicly that we will take on cases where the outcome is not guaranteed, and we will test the bounds of the law where it is uncertain or open to interpretation.

Given these commitments, the themes I have outlined today should provide clear guidance as to where you might focus your attention this year to avoid attracting ours.

Thank you for your attention today. I look forward to the Q&A discussion.

Search below to find any information or documents you are interested in.