The report’s conclusions are based on a review of trustee communications (including associated compliance plans and data) of 12 superannuation funds about insurance changes for inactive accounts, payment of inactive accounts to the ATO and exit fee and fee capping changes. The report’s findings are not, however, confined to the content of the communications.
As far as the content of written communications are concerned, not surprisingly, ASIC raises concerns about ‘unbalanced messaging’. In relation to PYSP reforms to the provision of insurance cover, this includes messaging that promotes the retention of insurance cover without indicating the purpose of the PYS reforms and possible adverse consequences of retaining cover (for example, duplicate cover or accounts, erosion of accumulated benefits etc) or other options available to the member. The report cites some examples of disclosure which (when considered in isolation from the communication in which they appear) are obviously inadequate.
As has been evident in recent ASIC publications, ASIC expects communications which ‘ensure that their members’ needs are prioritised’. This ongoing emphasis on individual member needs, rather than the interests of members (and beneficiaries) as a whole, seems to underpin an ASIC view that promoting the potential benefits of insurance cover is not legitimate without some very strong counterbalancing messaging.
Reflecting ASIC’s focus on individual member needs, ASIC is critical of the failure to include factual information about a member’s account balance, insurance premiums, level of insurance and last contribution date, or the date cover would cease if a member didn’t act, in trustee communications. However, the PYS reforms only require details like these (but not necessarily all these details) in insurance inactivity notices (not the initial 1 May 2019 notice). Generally, product disclosure requirements under the Corporations Act do not require personalisation of the content (with the exception of periodic statements) – the information is about the product or the fund, its features and (in the case of significant event notices) any changes that have or will occur and their effect on a general level. This means, for example, that while ASIC indicates in its report that better disclosures about the introduction of the fee cap also addressed how the fee cap is calculated, it’s difficult to see what (and why this) is expected (beyond stating how the fee cap must be expressed in product disclosure statements) given the beneficial nature of the change.
Unfortunately, ASIC’s concerns are broadly stated without details of the context (ie the type of communication) in which they arise. The PYSP reforms contain different requirements for the various prescribed notices arising from those reforms. The requirements for significant event notices and PDSs are also different. So while every communication is important, any critique of a communication should have regard to the regulatory requirements applicable to that communication. Also, information or advice relating to the effect on an individual member, which is dependent on their circumstances at relevant points of time (which may not be the time that a communication is produced), is largely (legitimately) seen as the role of personal advice, not product disclosures under Part 7.9 of the Corporations Act.
Some of ASIC’s findings extend beyond the content of communications to other matters including:
The report notes that ASIC has secured changes to disclosure practices in some cases, but it is also considering whether further regulatory action should be taken.
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