The Federal Court has made declarations that Colonial First State Investments Limited (Colonial), as trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund), made false or misleading representations and engaged in misleading and deceptive conduct when communicating with members.
In 2012, the Australian Government passed superannuation industry reforms requiring trustees, like Colonial, to offer members a default ‘MySuper’ superannuation product. MySuper products are designed to offer members a, simple and cost-effective superannuation product with lower fees and straightforward features.
The Court declared that on at least 12,978 occasions, in communication with members of the FirstChoice Fund, Colonial made misleading representations regarding investment directions. The misleading representations may have encouraged members to stay with the FirstChoice Fund rather than move to the MySuper product.
The misleading or deceptive conduct by Colonial included telling its members that recent legislative changes required Colonial to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case. Colonial also failed to tell members that if Colonial did not receive an investment direction from the member, it was required to transfer the member’s superannuation contributions into a MySuper product.
ASIC Deputy Chair Sarah Court said ‘Superannuation fund members need to receive clear and accurate information to make informed decisions. ASIC alleged Colonial made misleading representations which may have impacted members’ decisions about where to keep their funds and may have resulted in members’ funds being kept in higher fee-paying super products that included commissions. These actions did not put members’ interests first.’
The Court declared that Colonial, between 18 March 2014 and 21 July 2016:
engaged in misleading and deceptive conduct by sending 12,911 letters to members containing misleading representations about investment directions;
made false or misleading representations and engaged in misleading and deceptive conduct in 70 calls to members about investment directions;
failed to provide a ‘general advice warning,’ as required by the Corporations Act, in 17 calls to members; and
failed to do all things necessary to ensure the financial services covered by its financial services licence were provided efficiently, honestly and fairly.
Colonial consented to these declarations being made.
A penalty hearing has been listed for 12 October 2021.
‘MySuper’ provisions required trustees such as Colonial to:
pay default contributions from 1 January 2014 into a MySuper product; and
transfer ‘accrued default amounts’ from 1 July 2017 to a MySuper product.
Trustees were exempt from these requirements where they had received a valid investment direction from a member to retain them in a superannuation product rather than transitioning to a MySuper product.
ASIC commenced civil penalty proceedings against Colonial on 17 March 2020 (20-065MR).
Colonial’s conduct was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Part of that conduct was referred to ASIC in the Final Report (Volume 2 – Part 2, p 91).
On 12 October 2021, the parties made submissions on penalty before Justice Murphy. The Court’s decision is reserved.