The House economics committee will hold a public hearing this week to examine how regulators are responding to recent legislation amendments that aimed to prevent super funds from paying for fines using members’ money.
In recent months, a number of super funds including Cbus have sought court approval for plans to build war chests that will allow them to pay for future regulatory penalties and fines, including through the introduction of new fees for members.
“Amendments to Section 56 of the Superannuation Industry (Supervision) Act 1996 were made as part of the Government’s response to the Hayne Royal Commission to protect the funds of members by preventing trustees from using these funds to pay for fines incurred by their own actions,” said committee chair Jason Falinski.
“However, there have been wide reports of superannuation funds seeking judicial opinions to contravene this provision.”
The Australian Prudential Regulation Authority (APRA), the Australian Securities & Investments Commission (ASIC) and Treasury have been called to appear before the House economics committee on Thursday (10 February).
The hearing will form part of the committee’s ongoing review of the four major banks and other financial institutions.
“The committee deserves an explanation from APRA, ASIC and Treasury as to how they are interpreting these new provisions, and what actions they will take to ensure that the decisions made by Parliament are not easily and carelessly overturned,” said Mr Falinski.
“The committee would like to know how superannuation trustees could fund their penalties, and ways to do so that do not put member’s funds at risk or increase their fees.”
Alongside the regulators and Treasury, the committee will also hear from associate professor Scott Donald from UNSW who has been put forward as a specialist on governance within the superannuation sector.
“Throughout this inquiry, the committee has remained concerned about consumers’ best financial interests,” Mr Falinski said.
“While the regulators will be an important focus of the committee at this hearing, we also look forward to hearing from Professor Donald and his perspective on recent events.”
In November last year, minister for superannuation Jane Hume cautioned super funds against “saving their own skins” through the use of members’ money to pay for penalties and fines and hinted that new laws could potentially be introduced.
I seriously question whether the LNP understand how Industry/not-for-profit super funds work.
Setting aside the arguments around whether they should be advertising or if they should be offering free advice, why can’t they understand that if for whatever reason APRA or ASIC fine them, this can only come from one place. Member fees.
If they are facing potential fines (again the reason for these fines is a different issue), it would be reasonable that the directors/management would have money set aside to be able to pay them. Yes this will mean the cost is borne by the members, but this is the price the members pay for being in a member owned fund.
The alternative is to be in a retail fund where the shareholders would bear the brunt of the fines (and also pocket the higher ongoing fees).
Many retail funds and platforms are cheaper than NFP.
Industry funds will just use magical make believe money, like the billions spent on TV advertising they reckon wasn’t costing members
Sack the lot and get people in with a real and ethical business approach. I bet not one member approved fee for no service and sponsorship for these executives and friends benefit_ footy boxes and trips overseas for conferences. The rest of world pays their own way. Fine the people personally.
What about they cease spending tens of millions on advertising and sponsorship every
year and out those funds aside to pay the penalties?
Even though this already comes from members monies, at least it is not an additional cost to the member if a penalty were required.
In addition, perhaps the directors of Industry Super could be banned from directing their feeds to trade unions and withhold them within the fund to assist in paying a penalty ??
Maybe they could ask their trade union comrades to assist with the cost of the penalty??
Realistically, where could an industry super fund pay for a fine from? Surplus revenue goes to the member reserve, so the member reserve would have to pay the fine… if they need to top up the reserve, they would need to generate this through fee revenue. Am i missing something? They don’t have the option of dropping shareholder dividends…
Yes whilst i think it stinks that members ultimately pay the fines, via their earnings reserves or fees.
Where else can the funds come from to pay these fines in Industry Super ?
This was obviously missed in the compare the pair campaign
How about they show it as a cost in their fees?
Explain how this is fair.
– Directors of a fund are found in breach, incurs a fine and/or remediation which is payable by the fund they represent. The cost is borne by fund members.
– A Financial Adviser is found in breach, incurs a fine and/or remediation which is payable by the licensee, practice, insurer, adviser, or in the worst case by other advisers through the proposed CSLR. There is never a consideration to member account balances paying for these transgressions.
Where is the consumer advocacy to protect the value of member super balances from being eroded by having retirement savings used to pay fines and remediation?
If both entities in this example have a fiduciary duty to their members and clients, why is this handled differently? Considerations to equity?
Stop being so logical. They seem to miss the fact that retail funds charge higher fees and pass this on as a dividend to the shareholders – is this in the fund members best interest?