ASIC focuses on super inducements to employers

The Australian Securities and Investments Commission (ASIC) has signalled that it will act against superannuation funds which provide inappropriate inducements to employers and has served notice of its intent to super fund trustees.

In doing so it has also pointed to benefits being provided by funds to employer including free education materials and free tickets to sporting events.

The regulator has told the Productivity Commission (PC) inquiry into Superannuation Industry Competitiveness and Efficiency that it has served a notice on 47 trustees, asking questions about these key areas and have followed up with notices on a smaller number of trustees to explore the information we have received to date.

It said that over the course of2017, it had been conducting a project focusing on trustees and others interaction with employers when employers were making decisions about default super funds for their employees.

“Ultimately, we are interested in how this decision impacts the end consumer,” the ASIC submission said.

It said its work was aimed at seeking to understand:

• the nature of the advice provided and how this is paid for (80 per cent of our initial sample of trustees indicated that they provided advice to employers);

• the quality of the additional disclosure provided by employers by trustees, including whether these disclosures are misleading (77 per cent of our initial sample of trustees indicated that disclosure other than just a PDS was provided to employers); and

• the value of benefits provided to employers, with a view to obtaining more insight about the influence this has on decisions about default funds (our initial sample of trustees found that the most popular benefits are free educational materials for employers (33 per cent) as well as free tickets to sporting events or corporate hospitality (24 per cent).

The ASIC submission said that, while not the primary focus of the project, in seeking further information about benefits the regulator might need to consider the application of the inducement prohibition in s68A of the Superannuation Industry (Supervision) Act 1993.

“We expect our formal enquiries to be completed by the end of2017,” it said. “Given the importance of employers in the superannuation system, we think the way employers are treated by trustees and others is a serious matter. Where trustees fail to meet their legal obligations in their dealings with employers, we will consider whether regulatory action is appropriate.”