During Senate estimates, it was insinuated that if AustralianSuper had been a retail fund, it would have faced a much larger fine.
In a judgment delivered on 21 February, Australia’s largest superannuation fund was ordered to pay a pecuniary penalty of $27 million for failing to merge duplicate member accounts, affecting over 90,000 members, and resulting in $69 million in losses from extra fees and premiums between July 2013 and March 2023.
The Federal Court deemed the oversight “inexcusable”, and ordered the fund to pay the penalty within 30 days, publish a notice on its website and mobile app, and cover up to $500,000 in ASIC’s legal costs.
The $27 million fine was the amount recommended by ASIC after AustralianSuper admitted fault, though it is significantly lower than the maximum $140 million penalty the regulator could have sought.
During Senate estimates last week, ASIC officials were questioned about their approach to fines and whether they ensure equal treatment of all funds when penalties are imposed.
Senator Bragg challenged ASIC on why it didn’t pursue the maximum penalty, given the large number of impacted member accounts, asking Commissioner Sarah Court if it was due to the fund’s lack of shareholders, as stated in court documents.
Namely, the court’s judgement reads: “The imposition of a pecuniary penalty in the amount of $27 million is not expected to cause a material detriment to members of the fund. It is noted that if the fund had been run at a profit for shareholders and thus contributed to assets owned beneficially by either AustralianSuper or its shareholders, ASIC would have sought substantially higher penalties.”
Responding to Bragg’s question, Court denied that the “capital base” of the fund influenced ASIC’s decision.
“I assume what that refers to Senator is that one of the factors that the court will take into account when determining penalty is any benefit to the wrongdoer. So, if the fund does not retain the benefit, and it is returned to members well than it is a different scenario,” Court said.
When probed further about whether the regulator treats funds differently, Court stated that this is not ASIC’s position.
“Each matter depends on the particular circumstances,” she said. “One factor the court and ASIC will take into account is who has retained the benefit of the misconduct.”
The Commissioner also dismissed concerns that fines would be passed on to members, pointing to a law prohibiting penalties from being paid directly from member funds.
However, Bragg seemed convinced that if a non-industry fund had been at the centre of such a case, the fine would have been much higher.
“If it was a fund that had shareholders putting capital into the fund, it seems to me, by reading your submission to the court, that you would have imposed the maximum fine of $140 million,” the Senator said.
In response to his inference, Court firmly disagreed: “There’s a lot in that question that I’d dispute.”
“We are consistent, we have a very clear framework… consistent across all entities, whether they be superannuation funds or any other entity we regulate”.
Back in September 2023, ASIC said it had commenced civil penalty proceedings against the trustee of Australia’s largest superannuation fund, AustralianSuper, alleging failures to address multiple member accounts.
At the time, ASIC alleged that between 1 July 2013 and 31 March 2023, approximately 90,000 AustralianSuper members were affected, with total cost to members reaching approximately $69 million.
The corporate regulator also highlighted that AustralianSuper knew about multiple member accounts as early as 2018, but did not take proper action to resolve the issue until late 2021 or early 2022.
Also at the time, a spokesperson for AustralianSuper said the fund “regrets that its processes to identify and combine multiple accounts did not cover all instances of multiple member accounts”.
“This should not have happened, and we apologise unreservedly to members.”
Last week, AustralianSuper clarified that a provision was made for an expected penalty in FY2023–24 accounts, adding that member administration fees have not been increased to cover it.
