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ASIC raises absence of ‘best interests’ obligation for employers
Employers are not required to act in employees’ best interests when selecting a default superannuation fund and this creates an environment where conflicts arise, according to the Australian Securities and Investments Commission (ASIC).
In a submission filed with the Productivity Commission (PC) inquiry into superannuation efficiency and competitiveness ASIC has pointed to the fact that no offence is committed and there is no specified penalty when employers are found to be accepting inducements from superannuation funds.
“There are some limited provisions regulated by ASIC that have the aim of ensuring that employers make good decisions by addressing possible conflicts of interest. However, in ASIC’s experience (and as ASIC has publicly noted), these are of limited effect,” the submission said.
It said that, in particular, the prohibition on inducements by superannuation funds to employers under the relevant legislation did “not result in the commission of an offence nor the subsequent imposition of a penalty, and only gives rise to the creation of a statutory right for an aggrieved individual to commence a civil proceeding for the recovery of losses”.
“Employers also have consumer protections as a result of being deemed to be ‘retail clients’ for the purposes of receiving financial advice in relation to choosing a superannuation default fund,” ASIC said.
The regulator said that while it was the interests of employees not employers that was important in this context, the protections relating to financial advice on default fund selection did not directly impact those most affected by the advice – the employees.
“Furthermore, many employers will not obtain financial advice,” it said.
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In order for employers to act in the best interest of their employees, in relation to the default super fund they provide, ASIC should then request that legislation be changed to allow full choice of fund, and eliminate FWC control of Default Super. Until then, those employers are prevented by law in doing so.