ASIC’s focus on super complaints handling

Recently, the Australian Securities and Investments Commission (ASIC) conducted surveillance to assess superannuation trustees’ compliance with enforceable requirements relating to internal dispute resolution (IDR). The results indicated significant compliance issues and pointed to areas which need to be strengthened. For example, one in three trustees advised ASIC of varying failures in their IDR processes. These included failure to capture complaints, the omission of mandatory content from response letters or failure to send out responses to complainants. Based on these results, further surveillance will be conducted by ASIC.

ASIC is the body responsible for overseeing the operation of Australia’s financial services dispute resolution framework, including the IDR systems of superannuation trustees and other financial firms. This, together with external dispute resolution systems of the Australian Financial Complaints Authority (AFCA), forms the key consumer protection mechanism to ensure all complaints are resolved in a fair and timely manner.

Recently, to gauge the degree of superannuation trustees’ compliance with the enforceable requirements contained in ASIC’s Regulatory Guide 271 Internal Dispute Resolution, initial surveillance was conducted on a selection of trustees and funds. ASIC collected data from a selection of 35 trustees of 38 funds, covering 49,029 complaints received between 5 October 2021 and 28 February 2022. The data was then analysed to determine the status and timeliness of complaints handling, excluding objections to death benefit distributions. The results of this initial surveillance found indicators of significant compliance issues and areas which will need to be strengthened. According to ASIC, RG 271 requires super trustees to record all member complaints, and overall fund data as at 30 June 2021 indicates a complaints rate of 30 per 10,000 members. However, the data from the surveillance showed that 10% of the funds recorded fewer than 10 complaints per 10,000 members, which is significantly lower than the overall rate and may be a result of trustees failing to either record all member complaints or using an inappropriately narrow definition of “complaint”.

In addition, RG 271 has a 45-day maximum period for super trustees to respond to complaints as part of their IDR response (except for complaints regarding death benefit distributions, which have a longer timeframe). Of the 38 funds reviewed by ASIC as a part of this initial surveillance, 2.7% of IDR responses were sent after the 45-day maximum. The concern for ASIC is that super trustees may be over-applying the limited exceptions to the maximum timeframe or not sufficiently monitoring how long complaints take to resolve.

Failures were also detected in the area of informing complainants of delays and in IDR processes. Specifically, RG 271 requires that super trustees notify complainants of delays and their rights to go to AFCA when a written response is not sent within 45 days. The initial review results found that nearly 50% of complainants were not notified of the delay or their rights. Further, one in three trustees advised ASIC of varying failures in their IDR processes, including failure to capture complaints, the omission of mandatory content from response letters or failure to send out responses to complainants.

In the next stage of the surveillance and based on these results, ASIC will be seeking to check how relevant trustees are addressing concerns identified thus far, and closely examine a smaller subset of trustees. It notes that it will consider regulatory action where appropriate.