New ASIC powers may actually harm Super members

$9.7billion Superannuation fund Statewide Super, is being charged by the Federal Court after ASIC* discovered major discrepancies in their administration.

An administration change was not executed correctly, resulting in insurance data and regulations not being migrated into their new system accurately.

Members were sent statements and warning letters about invoices, despite not actually having insurance cover. Approximately 1300 members were affected, and the premiums raised from these members was $1,500,000.

Not only did Statewide not notify ASIC within 10 days of discovering the breach, they also didn’t notify its members nor do anything to prevent members having the same charges sent out the next year. Despite 2.5 years of corrections being undertaken since the situation was discovered, errors are still occurring.

The obvious risk of members paying premiums for insurance they don’t have, is that they would be unable to make a claim if they needed to and because they believed they had cover, would not be sourcing it elsewhere.

Under the ASIC Act, while ASIC is not hesitating to ensure that Superannuation funds do right by their members, the question arises as to who will cover the costs to fix the errors found by ASIC. Industry funds now have an extension until at least January 2022 on how long they can use member funds to pay for civil and criminal penalties for breaches, but for now, members are paying for their fund’s mistakes.

The new Best Financial Interests Duty means that funds also need to be able to prove that they are acting in their members’ best interests, but this creates extra administration burdens and associated costs.

The irony is that ASIC are trying to protect members but could actually be hurting them as their member fees increase to cover administration and court costs.

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* Australian Securities and Investment Commission (ASIC) is Australia's integrated corporate, markets, financial services, and consumer credit regulator.