Statewide Superannuation has been given a $4 million penalty by the Federal Court for providing members with misleading information on their insurance and failing to breach report the issue to the corporate regulator in time.
The Australian Securities and Investments Commission (ASIC) said the fund told at least 7,000 of its members they had insurance cover when they did not.
It also overcharged more than $2.5 million in insurance premiums to members who no longer held insurance as part of their super accounts.
ASIC deputy chair, Sarah Court, said: “This led to the risk that fund members may have found themselves without insurance when they needed it.
“When it discovered these issues, Statewide failed to report them to ASIC in a timely manner. Breach reporting is integral to board oversight and risk management by licensees. Financial services companies have strict obligations to report contraventions of the law to ASIC, including time limits in which to do so.”
On 22 December, 2021, the court imposed a penalty of $3.5 million on Statewide for misleading correspondence and a penalty of $500,000 for its failure to breach report the issue to ASIC.
The court ordered that Statewide:
- Undertake a remediation program to identify the members who were overcharged and remediate them in full;
- Reach an agreement with ASIC about engaging an independent expert to review and report on the implementation and effectiveness of that remediation program; and
- Publish an adverse publicity notice on its website and mobile app.
Justice Besanko on 17 January, 2022, said the fund’s conduct stemmed from inadequate management and risk control processes, including a failure to adequately manage systems changes.
ASIC noted this was the first civil case in which the court had imposed a civil penalty on a licensee for failing to report breaches to ASIC since new penalty powers were introduced in 2019.