The Australian Securities and Investments Commission (ASIC) has acted in relation to misleading and deceptive statements previously made to members of the NSP Buck Eligible Rollover Fund (now known as the Mellon Eligible Rollover Fund), that there were ‘nil’ or ‘$0.00’ administration fees associated with the operation of the fund.
ASIC has accepted an enforceable undertaking from Mellon Nominees Limited, formerly known as National Custodian Ltd, (Mellon) in relation to a claim made in the 2002 Annual Benefit Statements sent to all members that administration fees for the year ending 30 June 2002 were ‘nil’ or ‘$0.00’.
ASIC was concerned that this statement was misleading and deceptive, because it gave members the impression there were absolutely no fees connected with the operation of the fund. In fact, trustee and administration charges of 1.6 per cent per annum had been deducted prior to the calculation of member’s benefits for that year.
Although information about the trustee and administration charges of 1.6 per cent per annum were shown in an Annual Report accompanying the Annual Benefit Statement, ASIC was concerned that the information contained in the Annual Benefit Statement was not appropriately qualified or cross-referenced to information in the Annual Report.
As a result of ASIC’s concerns, Mellon Nominees Limited has given an undertaking that:
- Mellon will not make any statement to the effect that administration fees applicable to the fund are ‘$0.00’ or ‘nil’ or any similar statement in the future;
- for the next five years, Mellon will specifically review all Member Statements to ensure that they contain no misstatements; and
- Mellon will issue a corrective statement to all fund members within 30 days.
‘This case highlights the importance of providing superannuation members with clear and consistent information about the fees and charges that apply to their account. In addition to complying with specific disclosure requirements, superannuation funds must ensure the information is not presented in a way that could potentially mislead or deceive members about the fees and charges that apply’, ASIC Executive Director of Consumer Protection and International, Mr Greg Tanzer said.
‘It is important that information about fees and costs is made clear, regardless of whether they are deducted before or after the individual member benefits are calculated, because they impact on the end return to consumers.
‘This information will become increasingly important in a Choice of Fund environment and will remain a focus of ASIC’s regulatory attention’, Mr Tanzer said.
Background
The operations of the NSP Buck Eligible Rollover Fund were first reviewed as part of ASIC’s Eligible Rollover Fund Disclosure (ERF) campaign, which looked at disclosure practices of ERFs, including information contained in annual benefit statements to members.
ASIC formed the view that the information about fees in the Annual Benefit Statements were misleading and deceptive under s12DA and s12DB of the ASIC Act. These provisions have applied to all financial services providers, including superannuation funds, from 11 March 2002.
The periodic statement obligations under s1017D of the Corporations Act (and supporting regulations) that now apply to superannuation funds contain more comprehensive requirements for the disclosure of fees and costs. ASIC expects these requirements will enhance the disclosure of fees and costs deducted from investment returns or fund assets prior to the calculation of a person’s interest in the fund.
End of release