The Australian Securities and Investments Commission has confirmed superannuation funds don't have to tell their members if they use customers' funds to pay fines imposed by the regulator.
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NSW Liberal Senator Andrew Bragg raised concerns that fund members were in the dark over whether they were paying the fines, in a series of questions to ASIC during a Parliamentary Joint Committee on Corporations and Financial Services last Friday.
In response, the corporate regulator said in the "context of a substantial fine, there may be an obligation to disclose information by way of updating a product disclosure statement."
The regulator said a "substantial" fine may be detailed in a periodic statement, such as the funds' annual reports. But it stopped short of saying that members had to always be informed.
Senator Bragg said the response from ASIC shows "super funds can bury 'material' disclosures to members".
"ASIC's answer shows such fines can be hidden. This is wrong" he said.
"Super fund members should know if they are paying for [super] trustee errors. A compulsory savings system requires no less than full disclosure," Senator Bragg said.
He pointed to Hostplus which was fined $12,000 by ASIC in May for offering members "independent advice" when in fact the financial advisers were employed by Industry Fund Services, which is part-owned by Hostplus.
Not-for-profit super funds, such as Hostplus and public sector funds, don't have shareholder capital from which to pay fines unlike the retail super funds run by Australian sharemarket-listed companies.
That means the fines paid by not-for-profit funds have to be paid from member's accounts or the funds' reserves.
When it imposes a fine, ASIC issues a press release which will often be reported in the media but many members will not be aware that the fines are being paid from their accounts or their funds' reserves, Senator Bragg said.
He said the information should not only be made by the funds in their disclosure documents but also on their websites.
Most fines levied by the regulator on super funds to date have been small. For example, Hosplus' $12,000 fine works out at less than 0.012 cents per member. That's the standard fine for these types of infringements involving alleged misleading statements.
- SMH/The Age
