ob体育 is calling on superannuation trustees to ensure they are meeting their legal obligations for dealing with incoming money from consumers if a new or increased interest in a super product cannot be issued by the next business day.听聽聽
The call follows ob体育鈥檚 review of a sample of twelve superannuation trustees to understand how they met requirements for dealing with money received for a financial product set out in the Corporations Act 20011.听
Following the review, all trustees with deficiencies took action of some kind. This included implementing process changes for dealing with application monies to become compliant, improving disclosures about application monies, and/or formally notifying ob体育 of a reportable situation or paying remediation.听聽
鈥楢s financial product providers, trustees are required to safeguard incoming monies for products in prescribed ways,鈥� ob体育 Commissioner Danielle Press said. 鈥楾his is to protect a consumer鈥檚 money until the product is issued to them or they receive an increase in an existing product.鈥櫬犅�
鈥極ur review identified compliance gaps 鈥� all but one trustee failed to ensure their practices or disclosure aligned with their obligations.鈥櫬�
鈥榃hile no significant individual member impact was identified in our review, we were very concerned to find the trustees hadn鈥檛 given enough consideration to these important obligations, in some cases for decades, potentially putting members鈥� money at risk,鈥� Ms Press said.听聽
鈥榃e expect trustees and other product issuers to take these obligations seriously. Trustees should thoroughly review their arrangements for dealing with members鈥� money before a product is issued as well as those of their service providers.听聽
鈥榃here we identify poor progress by trustees in changing their processes within a reasonable time, ob体育 will consider appropriate regulatory action,鈥� Ms Press said.听聽
ob体育 found four main issues among the trustees reviewed:聽聽
- Using a non-compliant account to hold money: Some trustees used an account that did not meet the requirements for some or all of their superannuation products. For example, the account used was not a designated trust account.听聽
- Not holding money for the required time: Several trustees did not retain a member鈥檚 money on trust in a compliant bank account until the time an interest in a product was issued or increased. For example, before a new or increased interest for a member was issued, incoming money was being moved or 鈥榮wept out鈥� of the prescribed account daily and invested as part of a general fund strategy. Some trustees may need to revise their incoming cashflow management practices to ensure they comply.
- Failure to identify money subject to the requirement: Some trustees reported that they could not or did not identify money subject to the requirements of section 1017E. For example, some trustees had no daily monitoring arrangements in place while others did not check how their service providers handled money for a member when it was first received.听
- Inadequate disclosures to consumers: In ob体育鈥檚 view, most of the disclosure material reviewed required improvement. For example, it often did not clearly explain who would receive the benefit of interest earned on incoming money before a product is issued (or increased), or explain when no interest would be payable.听
ob体育 raised these concerns with the trustees reviewed to ensure changes are implemented to achieve full compliance. Separately, ob体育 has communicated with major auditing firms and industry bodies to reiterate the role auditors can play in assisting to identify and address compliance issues in a timely manner.听聽
叠补肠办驳谤辞耻苍诲听
The Corporations Act 2001 imposes particular consumer protection obligations on product providers who issue a product disclosure statement and receive money to acquire or increase an interest in a financial product.听聽
Section 1017E outlines that this money must be held in trust in an account that meets certain requirements until the product is issued or increased for the consumer or the money is returned or failing that, paid to ob体育 as lost application money. It also imposes a specific disclosure requirement related to interest earned on money while it is subject to s1017E.听
A product issuer that fails to hold incoming money in trust for the sole benefit of the person entitled to it, until a product is issued or increased, could place unallocated money at risk if a product issuer or their service provider pause or cease operations for any reason. The obligations extend to dealing with money received for a super fund member (such as contributions and roll-overs into a fund) during the time it takes to issue an interest for a new member, or increase the interest of an existing member.听聽聽
The superannuation trustees ob体育 reviewed were selected to represent a mix of industry, retail, and corporate super funds, with both internal and outsourced administration arrangements.