ASIC moves against REST on false and misleading charges

The Australian Securities and Investments Commission has initiated action against industry superannuation fund, REST for false and misleading representations. 

The regulator has announced the commencement of civil penalty proceedings in the Federal Court against Retail Employees Superannuation Pty Ltd (REST) 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 is alleging 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.  

It said in a statement that 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 have otherwise 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. 

    In a statement reacting to the ASIC announcement REST said that, as a profit-to-member fund, it had  the best financial interests of members at its core.

    “We are disappointed with ASIC’s decision to launch proceedings about a matter that Rest reported to the regulator, and for which REST is remediating affected members,” it said.

    “The proceedings relate to the disclosure of an internal business process that was removed in May 2018 that required some members to provide an employment termination date or separation certificate to process a rollover of superannuation from Rest into another fund.”

    “REST is currently contacting and remediating members who may have experienced a delay in the transfer of their super as a result of the application of this business process between 1 January 2014 and 2 May 2018.”

     




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Wow, never thought I would see the day ASIC would go against an industry fund, even if it is only a reasonably minor matter.

Then again, I can't help but wonder if this is a just a token only due to the current parliamentary enquiry, and the ASIC world will go back to their normal biases later on. Out of all the many things these groups do that would lead to a banning or multi-million dollar penalty in retail or adviser land, this seems pretty mild to be chasing up.

Minor really, removing a legal right to choice but lies, misrepresentation or ignorance. Seems pretty serious to be, particularly as you know how many were affected. ASIC taking legal action because REST wouldn’t remediate as asic wanted I am guessing and pushed back to much. Seems REST has cowboy lawyers who don’t care because non for profit also means you can waste all your capital on whatever.

Wow is this actually going to see ASIC do something about their best buddies Industry Super. I bet they get a tiny slap on the wrist and all rolls on.
Mind you All the Industry Funds do this.
“We’re all in this together”, they sure are, ISN hate you trying to get your money elsewhere and do anything to stop it .

This has been going on for years as the article pointed out. Industry super funds can effectively do whatever they like all with impunity. If they don't want to transfer a member out to another super fund they will stall, obstruct and do anything to retain that client. Obfuscation is their watchword.

Every time you rollover Qsuper they call the client before they action the requested rollover and delay the transaction until their retention people call them and start questioning why they are leave etc etc I have had a lot of customers say they were felt every uncomfortable from the call... this is done even when we are doing a rollover into another industry fund not to mention large delays in transactions...

Qsuper also used to use good the good old we need to talk to the employer as well...

There are operational reasons why funds do this (though most have moved away from it) that stem from the days of participating employer agreements. For members making full exits, it is important to know that the employment has been terminated (or that the last SG has been made before now paying to the employee's new fund), because commonly, a final SG payment comes through after the exit (especially for quarterly payers), requiring the creation of a new account and then exiting of that. This is a problem for both the member and the fund.
For Partials, the reasoning is that if a member is making a partial withdrawal, minimum balance limits are allowed under PYS, to prevent insurance loss and fee refunds and also to allow adequate funds in case the annual return is negative.
That being said, many funds have moved away from this and made their operations more efficient, which is better all round.
I don't think ASIC will win this one.

I can appreciate the "delayed contribution" issue, but there's nothing to stop the fund flagging any new contribution toan account which has already transferred out and send it on later. Surely they would have that capability.

In any case, I expect we'll see a slap on the wrist and life goes on as usual. :P

In relation to partials, the PYS legislation only came in last year and did not affect the majority of industry funds during the stated period.

What ASIC should be investigating is what clients are told in regard to their insurances when switching their funds to Rest or the other no advice funds.

Clients are ALL TOLD that there are no exclusions on their Automatic Acceptance Insurance. Which is a true until you come to claim time when everything in you medical history in the past is excluded.

You can bet 100% plus that new clients are not told about the potential insurance loss from transferring funds inwards.

I wonder if my ASIC fees are paying for this???

"Compare the pair" is about as in your face for competing Retail funds as it gets.
FIGURES PULLED OUT OF "THIN AIR" AND POSTED IN ABOUT 15 LINES AT THE BOTTOM OF THE ADD THAT A SPEED READER COULD NOT SUCCESSFULLY TACKLE. And the poor clients fall for it as Industry funds use "sentimentality" to successfully con the unsuspecting victim. Were all in this together ?? They certainly are.

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