The watchdog has commenced civil penalty proceedings in the Federal Court against retail industry fund REST, for allegedly misleading members about their ability to transfer their super out of the fund
The regulator has alleged that from at least 2 March 2015 to 2 May 2018, REST made representations that discouraged, and in many cases delayed or prevented members from transferring some or all of their funds to another super fund.
ASIC’s case is that these members were denied their lawful rights to superannuation portability and choice of super fund, causing members to suffer financial loss.
The regulator has further alleged that the conduct resulted in the fund retaining a higher level of funds under management than would otherwise have occurred.
Specifically, ASIC has claimed that REST made representations to members who made, or were considering marking, full balance transfers to another fund that:
• if they remained employed by an employer who made contributions to the Fund (REST employer) and that employer continued to make contributions to REST, they were required to keep a minimum balance of $5,000 in their account with the Fund;
• if they remained employed by their REST employer but their employer was willing to contribute to another fund, members needed an employer declaration stating either the date the employer stopped making contributions to the Fund or confirming the member's 'choice of fund rights' in order to leave the Fund;
• if they were no longer employed by their REST employer, members needed to obtain a separation certificate or confirmation of their termination date from their employer and provide this to REST before they were able to transfer the full balance of their REST account to another super account
The representations were made both orally and in writing, in general publications and standard forms distributed to members and directly to members making specific requests to transfer their full balance out of the fund.
ASIC has alleged that each of REST’s claims were false, misleading or deceptive, or likely to mislead or deceive because, under the Superannuation Industry (Supervision) Act 1993 (SIS Act) and associated regulations, REST was not permitted to impose these conditions on transfers out of the fund.
The law required REST to process full balance requests within three business days upon receiving specific mandatory information. The obligation to process rollovers to another superannuation fund within the three-day period was introduced in 2013 as part of the government’s SuperStream initiative.
The regulator expressed concern that where members are prevented from consolidating funds, they may have copped unnecessary and increased fees and costs from holding multiple superannuation accounts.
ASIC is seeking declarations, pecuniary penalties, and other orders against REST.
REST responded to the action, commenting it was “disappointed” with the decision to launch proceedings, when it had reported the matter to the regulator and was already remediating affected members.
“The proceedings relate to the disclosure of an internal business process that was removed in May 2018 that required some members to provide an employment termination date or separation certificate to process a rollover of superannuation from Rest into another fund,” the fund stated.
“Rest is currently contacting and remediating members who may have experienced a delay in the transfer of their super as a result of the application of this business process between 1 January 2014 and 2 May 2018.”
The date for the first case management hearing is yet to be scheduled by the court.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].