Trustees reminded that AFCA can make breach referrals to ASIC and APRA

Superannuation funds and others dealing with the Australian Financial Complains Authority (AFCA) need to remember that matters can be referred to the relevant regulator – either the Australian Securities and Investments Commission (ASIC) or the Australian Prudential Regulation Authority (APRA). 

Specialist financial services barrister and Superannuation Complaints Tribunal (SCT) member, Noel Davis said that when AFCA received a complaint it might then be required to provide information on that complaint to either ASIC or APRA. 

He said this was because section 1052E of the Corporations Act required that, for a superannuation-related complaint, if AFCA observed a serious contravention of the law or a contravention of the governing rules of a fund or a breach of an insurance policy may have occurred, it would need to give the detail to the relevant regulator. 

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“AFCA does not have any choice in whether to report it or not because the section imposes an obligation on it to do so,” Davis said. 

He said a similar requirement applied to the Superannuation Complaints Tribunal (SCT), noting that in a 2018 decision of the tribunal in relation to a fee for no service complaint, the tribunal determined that details of the complaint be provided to ASIC. 

“That decision against the MLC trustee was then successfully appealed to the Federal Court on other grounds,” he noted. 

“In an unrelated decision, a $57.5 million penalty has now been imposed by the Federal Court on the MLC trustees for charging fees, where no service was provided to the members, as a result of an investigation by ASIC.” 

Davis said that there had been a number of other cases where the SCT decided that particulars of a breach or a contravention by a trustee or insurer be given to the regulator. 

“Given the mandatory nature of section 1052E, AFCA has the same obligations as the SCT had. Therefore, even a breach of the governing rules of a superannuation fund revealed in a complaint, such as failing to do something the governing rules required, can result in AFCA having to report it to a regulator.” 

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