Corporate regulator ASIC is targeting underperforming superannuation funds as part of its new corporate plan, saying it was “putting trustees on notice”.

By Lachlan Colquhoun


Delivering a keynote address at the FSC Summit 2019, ASIC chair James Shipton said the focus on trustee misconduct was a main plank in the regulator’s new four year corporate plan, also released this week.

Persistent underperformance, he said, was a “key indicator and a red flag” which would help ASIC to identify misconduct.

“Consumers expect super trustees to act in their best interests to improve retirement income and consistent underperformers are clearly not doing enough,” said Shipton.

“While underperformance is not illegal, it is frequently caused by conduct that does breach the law: eg conflicts of interest, failure to act in members’ best interest, or a lack of diligence by trustees.”

Superannuation was “other people’s money, but not just other people’s money,” says Shipton.

“It’s money that those people have put into the system,” he said.

Also on superannuation, Shipton said ASIC would continue to focus on the erosion of balances through inappropriate or poor value insurance, and from excessive advice fees.

“We are looking at 25 superannuation funds across the retail, corporate, public and industry sectors, including a test sample of advice to see the quality of advice provided,” he said.

ASIC’s corporate plan identifies a set of strategic priorities for the year ahead, which Shipton identified as:

  • High deterrence enforcement action
  • Prioritising the recommendations and referrals from the Royal Commission
  • Delivering as a conduct regulator for superannuation
  • Addressing harms in insurance
  • Improving governance and accountability
  • Protecting vulnerable consumers
  • Addressing poor financial advice outcomes

On the issue of enforcement action, Shipton noted that since he joined the regulator in February 2018 to June of this year there had been a 21 percent increase in the number of ASIC enforcement investigations.

There had also been a 21 percent increase involving the “big six” and a 166 percent increase in wealth management investigations.

ASIC, said Shipton, was “very cleared eyed” about taking matters to court and he recognised its actions would both succeed and fail.

“Nevertheless, the ultimate interpretation of the courts as to the suitability of our actions is a fundamental part of our system of government,” he said.

Another focus was a review of Total and Permanent Disability Insurance, and the regulator is soon to publish a report into claims handling.

Shipton said TDP insurance was widely held, with over 13 million Australian’s holding cover with 90 percent insured through their superannuation funds.

He said the ASIC review had identified four “important industry wide problems” which life insurers and superannuation trustees must fix.

These were: restrictive TPD definitions resulting in poor consumer outcomes, friction in claims handlings processes which are likely to lead to withdrawn claims, deficiencies in insurers’ ability to record and search for data, and higher than expected declined claim rates.

ASIC would also turn its lens onto the funds management industry to investigate competition issues, but also to make sure that investors are protected from market downturns which prompted liquidity problems or even collapses.

“We intend to review the definition of liquid assets in the context of the Corporations Act rule about whether a scheme is liquid and can therefore pay redemptions,” said Shipton.

“We believe it is currently too broad and currently allows inherently illiquid schemes to call themselves liquid. We will be consulting this year on a narrower definition.”


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