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21-034MR ASIC commences civil penalty proceedings against REST for misleading and deceptive representations to members
ASIC has commenced civil penalty proceedings in the Federal Court against Retail Employees Superannuation Pty Ltd (REST), a superannuation trustee, for false or misleading representations made about the ability of its members to transfer their superannuation out of the Retail Employees Superannuation Trust (the Fund).
ASIC alleges that, from at least 2 March 2015 to 2 May 2018, REST made representations that discouraged, and in many cases delayed or prevented, members from transferring some or all of their funds to another superannuation fund. ASIC’s case is that these members were denied their lawful rights to superannuation portability and choice of superannuation fund, causing members to suffer financial loss. ASIC further alleges that this conduct resulted in REST retaining a higher level of funds under management than would otherwise have occurred.
Specifically, ASIC alleges REST made representations to members who made, or were considering making, full balance transfers to another fund that:
- if they remained employed by an employer who made contributions to the Fund (REST employer) and that employer continued to make contributions to REST, they were required to keep a minimum balance of $5,000 in their account with the Fund;
- if they remained employed by their REST employer but their employer was willing to contribute to another fund, members needed an employer declaration stating either the date the employer stopped making contributions to the Fund or confirming the member's 'choice of fund rights' in order to leave the Fund;
- if they were no longer employed by their REST employer, members needed to obtain a separation certificate or confirmation of their termination date from their employer and provide this to REST before they were able to transfer the full balance of their REST account to another super account.
These representations were made both orally and in writing, in general publications and standard forms distributed to members and directly to members making specific requests to transfer their full balance out of the Fund.
ASIC alleges that each of these representations were false, misleading or deceptive, or likely to mislead or deceive because, under the Superannuation Industry (Supervision) Act 1993 and associated regulations, REST was not permitted to impose these conditions on transfers out of the Fund.
ASIC is seeking declarations, pecuniary penalties, and other orders against REST.
The date for the first case management hearing is yet to be scheduled by the Court.
Superannuation trustees are required by law to act in the best interests of members. Choice of fund and portability of funds are important rights for members. They allow members to consolidate funds and, among other benefits, to avoid superannuation balance erosion through unnecessary fees and costs. ASIC is concerned that where members are prevented from consolidating, this may lead to increased fees and costs of holding multiple superannuation funds.
The Superannuation Industry (Supervision) Act 1993 and associated regulations required REST to process full balance requests within three business days upon receiving specific mandatory information. The law did not allow a trustee to require information about a member’s employment status and whether or not their employer had offered them a choice of fund for future contributions before processing requests.
The obligation to process rollovers to another superannuation fund within three days was introduced in 2013 as part of the government’s SuperStream initiative to improve the efficiency of the superannuation system. Prior to this, rolling over and consolidating funds was a lengthy process which often ended in failure.
A case management hearing has been set for 9.30 am on 9 April 2021.
Editor's note 2:
Orders were made on 9 April 2021 at the case management hearing before Justice Beach for the progression of the matter. The next case management hearing is listed in the Federal Court on 18 August 2021. Download the orders.
Editor's note 3:
ASIC filed its Statement of Claim on 28 April 2021. Download the Statement of Claim.
Editor's note 4:
Orders were made on 18 August 2021 for the progression of the matter. The next case management hearing is listed in the Federal Court on 11 February 2022.
Editor's note 5:
Orders were made on 8 February 2022 for the progression of the matter. The next case management hearing is listed in the Federal Court on 22 March 2022.
Editor’s note 6:
An Interlocutory Application will be heard in the Federal Court on Monday 11 April 2022.
A further case management hearing is listed in the Federal Court on Friday 3 June 2022.
Editor's note 7:
On 29 April 2022, the Federal Court dismissed ASIC’s discovery application filed 17 September 2021 and subpoena application filed 29 November 2021, which sought the production of certain legal advices provided to REST.