AustralianSuper breached fundamental duties and obligations owed to its members, court says
The Federal Court ordered AustralianSuper to pay a $27m penalty based on its failure to merge multiple superannuation accounts and breach of the fundamental duties and obligations owed to its members.
“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,” said Sarah Court, deputy chairwoman of the Australian Securities and Investments Commission (ASIC). “This was exacerbated by a systemic failure to escalate and remediate the issue once it was identified.”
The ASIC shared in its media release that this was the first case that it brought in its capacity as a co-regulator with the Australian Prudential Regulation Authority (APRA) that alleged contraventions of s. 52 of the Superannuation Industry (Supervision) Act 1993.
The Federal Court found that AustralianSuper inexcusably failed to put processes and systems in place to ensure compliance. From 1 July 2013 until 31 March 2023, about 90,700 AustralianSuper members had multiple accounts that should have been merged, which led to roughly $69m in losses through multiple administration fees, insurance premiums, and lost investment earnings.
“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,” said Justice Lisa Hespe, adding that these failures were “serious and highly concerning.”
Hespe found that AustralianSuper had no excuse for failing to implement the processes and systems needed to ensure compliance under the law. “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,” Hespe said for the Federal Court.
Hespe noted that some internal correspondence suggested that staff at AustralianSuper might have “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.”
AustralianSuper has more than 3.5 million members and over $365bn in member assets. In December 2021, it reported to the ASIC a potential failure to meet its obligations to consolidate duplicate accounts, said the ASIC’s media release.
The ASIC broadly reviewed the practices of the trustees of Australia’s superannuation funds, published its findings regarding poor practices causing consumer harm in June 2023, ended its investigation in September 2023, then brought civil proceedings before the Federal Court, the media release said.
“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,” Court said in the media release.
AustralianSuper has remediated members who held multiple superannuation accounts for the period from 1 July 2014 to 31 March 2023, the media release shared.
