The Australian Securities and Investments Commission (ASIC) has today provided guidance to corporate superannuation advisers to assist them in complying with their obligations as Australian Financial Services (AFS) licensees when providing advice to employers.

The guidance, which takes the form of a frequently asked question (QFS 160), responds to industry requests for guidance. It clarifies that all employers, regardless of their size or sophistication, must be treated as ‘retail clients’ when giving advice about superannuation.

‘ASIC is committed to helping corporate superannuation advisers understand their obligations when providing superannuation advice to employers,’ said ASIC's Assistant Director of Compliance, Ms Louise du Pre'.

‘We wish to make it clear that no ‘small business’, asset value or other size consideration applies. Financial product advice provided to any employer about superannuation or Retirement Savings Account (RSA) products is considered advice to a retail client, and retail client obligations apply.’

Ms du Pre' said the introduction of super choice on July 1, 2005 and Australian Prudential Regulation Authority (APRA) licensing requirements have contributed to the need for employers to seek advice on superannuation.

‘This advice may be about who to nominate as a ‘default fund’ under Choice fund; whether or not to wind up their corporate superannuation fund, and if so whether to transfer member benefits into a larger superannuation fund or master trust; and what level of superannuation benefits to include in their remuneration packages for employees,’ said Ms du Pre'.

When advising employers about these issues, advisers may take into account:

• the number of employees;
• the employer's overall human resources strategy;
• manual or non manual occupation of employees;
• insurance arrangements; and
• any industry award relevant to the employer.

If advisers take these circumstances into account, then the advice is considered personal financial product advice. In this case, advisers will require the appropriate license authorisation and will have to give the employer a Statement of Advice.

Ms du Pre' said ASIC is currently conducting nation-wide surveillances to monitor the advice that superannuation trustees, licensed advisers, and tender consultants, give employers when they seek information about superannuation.

‘ASIC has found that most superannuation trustees are only providing general advice to employers and have developed compliance systems to ensure they act within their general advice obligations. We have, however, found a divergence in levels of compliance by advisers and tender consultants with their advice obligations when advising employers,’ Ms du Pre' said.

‘Advisers and tender consultants are encouraged to review their compliance procedures and, if found lacking, should consider their breach notification obligations,’ she added.

QFS 160 is available on the ASIC website at www.asic.gov.au/fsrfaq.