By Mark Bland, Partner and Geoffrey McCarthy, Special Counsel 

This fortnightly update is designed to help superannuation trustees track and manage regulatory change. We look ahead to forthcoming developments, look back at recent changes and then consider the impact on trustees. This edition’s spotlight is on ASIC new requirements for Internal Dispute Resolution, including the burning question of complaints on social media.

Key developments

31 July – The first monthly and quarterly Pandemic Data Collection reports were due for submission to APRA via D2A

Looking ahead

21 August – Monthly Pandemic Data Collection reports are due for submission to APRA via D2A. COVID-19 Pandemic Data Collection Request

Looking back

5 August – ATO issues revised FAQs on COVID-19 Early release of super.  The information summarises and restates aspects of the process, noting ATO will provide a report identifying cases where a determination has been made recommending that Trustees further strengthen verification processes with the member over and above existing verification processes that apply to all determinations.  Design and implementation information

5 August – APRA and APRA appeared before the house Economics Committee to discuss Annual Reports Oversight of ASIC and APRA.  APRA and ASIC summarised their work during the COVID-19 pandemic and how regulatory priorities have been adjusted.  See Standing Committee on Economics

3 August – FASEA released exam results from the sixth Financial Advisers Exam held in June 2020.  FASEA identified areas of underperformance in: financial advice regulatory and legal requirements, identifying client biases and understanding the application of the Code of Ethics and Corporations Act as.  FASEA releases June Exam Results

31 July – The first monthly and quarterly Pandemic Data Collection reports are due for submission to APRA via D2A. This first submission captures the April, May and June 2020 reporting periods in SRF 921.0 (monthly form), the June 2020 reporting period in SRF 921.1 (quarterly form) and the April 2020 reporting period in SRF 921.2 (once off ad-hoc form). Frequently asked questions – Pandemic Data Collection

30 July – ASIC publishes a new Regulatory Guide 271 Internal dispute resolution, outlining updated IDR standards and requirements. https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-271-internal-dispute-resolution/

27 and 29 July – Hearing for Parliamentary Joint Committee on Corporations and Financial Services on Litigation funding and the regulation of the class action industry.

27 July – ASIC publishes new process for making applications to ASIC via its regulatory portal Relief applications and documents now lodged through ASIC Regulatory Portal

24 July – Retirement Incomes Review report given to the Treasurer.  The review by an independent panel received more than 100 submissions in response to its Consultation Paper of November 2019.  While not being limited to superannuation and addressing issues such as adequacy, equity, sustainability and cohesion, there has been significant focus on potential recommendations about changing scheduled SGC rates. Retirement Incomes Review

24 July – Submissions closed for feedback on ASIC Cost recovery implementation statement – 2019-20. Superannuation trustees are to be required to pay a minimum levy of $18,000. Where the total value of assets in all registrable superannuation entities operated by the trustee exceeds $250 million, that trustee will have to pay a levy of $13.37 per $1 million of total assets over $250 million. Cost recovery implementation statement – 2019-20 For feedback

On the horizon spotlight – ASIC’s Internal Dispute Resolution Requirements

ASIC released Regulatory Guide 271 Internal dispute resolution on 30 July 2020 (RG 271).  While it includes the general guidance to aid compliance with existing law, RG 271 is more than a mere “guide” as it includes requirements that are enforceable through a legislative instrument.

The standards and requirements set out in ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98 and highlighted in RG 271 are enforceable. Other highlighted requirements in RG 271 reflect existing legal requirements in ASIC’s view.

• Prudential Standard SPS 515 Strategic Planning and Member Outcomes
• Prudential Practice Guide SPG 515 Strategic and Business Planning

In May 2019, ASIC released Consultation Paper 311 Internal dispute resolution: Update to RG 165 (CP 311). Consultation on CP 311 closed 9 August 2019. The CP proposed updates to ASIC Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165) to follow the findings of ASIC investigation into current complaints handling processes published in Report 603: The consumer journey through internal dispute resolution process of financial services providers.  Instead of updating RG 165, ASIC has left it in place to address prior to 5 October 2021 and issued the new RG 271 to apply to complaints on or after 5 October 2021.

The Updates to RG 165 in RG 271 were prompted by:

• introduction of statutory IDR obligations introduced by the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Act 2018 (AFCA Act); and
• findings from ASIC’s investigations into IDR processes, outlined in Report 603.

The requirements include that a Trustee who holds an AFSL or issues under a Product Disclosure Statement must not merely have complying IDR arrangements, but then must comply with those arrangements, as an obligation under section 912A of the Corporations Act.

IDR process

A Trustee’s internal dispute resolution procedures (IDR process) are required to apply in relation to complaints from members and retail clients of financial services it provides. The IDR process must be free and easy to understand and use, including by people with a disability or language difficulties. The complaints policy and an internal complaint management procedure must be publicly and readily accessible and material that explains the Trustee’s IDR process must be provided to complainants free of charge.

Complaint

The term ‘complaint’ is “an expression of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required”.

ASIC considers that this includes:

• complaints in posts on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable
• an objection to a proposed decision about how and to whom to pay a superannuation death benefit distribution;
• complaints about a matter that is the subject of an existing remediation program or about the remediation program itself (e.g. delays, lack of communication);
• complaints about the handling of an insurance claim (e.g. excessive delays or unreasonable information requests).

ASIC has indicated that it interprets the words ‘or about an organization’ in the definition of complaint not to cover complaints that are neither to the organisation nor complaints that are not in posts on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable.  For example, a comment on a Facebook page of a Trustee or a tweet directed at a Trustee’s twitter account may be caught. It would not cover for example a comment made on an online newspaper site in relation to an article mentioning the Trustee.  Although this note is expressed as interpretative, it is nevertheless part of the enforceable content under the instrument, and so would seemingly determine the meaning of the relevant definition.

ASIC notes that Trustees must address complaints made by:

• members or former members of a regulated superannuation fund and people with an interest in a superannuation annuity policy issued by a life company;
• beneficiaries with an interest in a death benefit;
• parties (and intending parties) to an agreement under the Family Law Act 1975 or order affecting superannuation, including a member or beneficiary’s spouse or former spouse who is party to an agreement, or subject to an order about that person’s superannuation interest; and
• someone eligible to request information about a member or beneficiary’s superannuation interest that is or is intended to be subject to an agreement.

Outsourcing

If a Trustee outsources internal dispute resolution, it must:

• have measures in place to ensure that due skill and care is taken in choosing suitable service providers;
• monitor the ongoing performance of service providers; and
• appropriately deal with any actions by service providers that breach service level agreements or fall short of the Trustee’s obligations under RG 271.

Responding to complaints

Trustees must respond to complaints setting out either confirmation of actions taken by the firm to fully resolve the complaint or reasons for rejection or partial rejection of the complaint, and where applicable the right to take the complaint to AFCA if the complainant is not satisfied and along with the contact details for AFCA.  The Trustee must ensure that complaint resolution outcomes are implemented in a timely manner when a complaint is closed.

Generally, for complaints about a Trustee’s decisions as trustee, a response must be provided within 45 calendar days. If the complaint relates to a superannuation death benefit distribution, the time limit is 90 calendar days after the expiry of the 28 days period for objections to a proposed distribution.  When responding, the decision-maker must also give the complainant information about the 28 calendar day time limit (under section 1056 of the Corporations Act) for lodging a complaint with AFCA.

If when informing a complainant of an IDR decision the option to internally escalate to a consumer advocate is offered, and this is taken up, then the IDR response following internal review must be provided within the maximum timetable from the time of the original complaint, but the period from notification of the decision initially until the complainant decides to use the internal review can be discounted.  It is not clear that this approach can be applied to decisions about death benefit distributions because the 28 day period runs under section 1056 from the time of the earlier decision.

There are exceptions.  Longer time is allowed if there is no reasonable opportunity for the financial firm to provide the response within the relevant maximum timeframe because resolution of the individual complaint is particularly complex or circumstances beyond the financial firm’s control are causing complaint management delays. However in that case, before the relevant maximum IDR timeframe expires, the Trustee must give the complainant an ‘IDR delay notification’ that informs the complainant about the reasons for the delay, their right to complain to AFCA if they are dissatisfied and the contact details for AFCA. In case of death benefit decisions, the fact that AFCA can’t consider a complaint until a decision has been made must be noted.

After reviewing any objections to a proposed death benefit distribution, the decision-maker may either amend the proposed decision and give all potential beneficiaries additional notice that the decision-maker proposes to make a new decision (and further objections must be notified to the death benefit decision-maker within 28 calendar days).  The notice must set out the proposed final outcome of their complaint including reasons addressing any objection. When this happens the 90 calendar day deadline restarts from the end of the 28 day objection period.

Alternative the decision maker may amend or maintain the previous proposed decision and give all potential beneficiaries notice that they have made the decision (and that eligible complainants can make a complaint to AFCA within 28 calendar days).

In either case the same information must also be provided to non-complaining beneficiaries.

ASIC has determined that:

“A complainant may lodge a complaint about insurance in superannuation with the insurer or the trustee. Trustees, insurers and administrators must have arrangements in place to ensure the maximum IDR timeframe is complied with regardless of the initial lodgement point. Time starts to run from the date the complaint is first lodged with either one of the parties.”

If a Trustee rejects or partially rejects the complaint, the response must clearly set out the reasons for the decision by identifying and addressing the issues raised in the complaint, setting out the findings on material questions of fact and referring to the information that supports those findings.  The response must provide enough detail for the complainant to understand the basis of the decision and to be fully informed when deciding whether to escalate the matter to AFCA or another forum.

Records and oversight

Trustees must have an effective system for recording information about complaints. The system must enable firms to keep track of the progress of each complaint and provide reports about complaints data regularly to senior management and the board. If a Trustee provides reports to the board and/or executive committees, the reports must include metrics and analysis of consumer complaints, including about systemic issues identified through those complaints. The board must set clear accountabilities for complaints handling functions, including the management of systemic issues identified through consumer complaints.

Trustee must:

• encourage and enable staff to escalate possible systemic issues they identify from individual complaints;
• regularly analyse complaint data sets to identify systemic issues;
• promptly escalate possible systemic issues to appropriate areas within the Trustee for investigation and action; and
• report internally on the outcome of investigations, including actions taken, in a timely manner.

Resourcing

The IDR process must be resourced so that it operates fairly, effectively and efficiently and the Trustee must regularly review whether it is adequately resourced. Staffing numbers must be sufficient to deal with complaints in a fair and effective manner within maximum timeframes. This includes resourcing to deal with intermittent spikes in complaint volumes. Relevant staff must have appropriate authority to be able to resolve complaints.  Trustee must ensure that the authorities for determining and/or approving complaint outcomes (including product contract variations) and the financial delegations for paying amounts to complainants are in place to facilitate the fair and efficient resolution of complaints.

Impact on Trustees

Many of the requirements are not new and the reduction in time for non death benefit distribution related superannuation complaints has been expected as transitional arrangements come to an end.

However there will be a considerable expectation on Trustees to enhance their arrangements to record, analyse, report on and assess systemic implications of complaints.  There needs to be clear processes encouraging identification and appropriate referral of systemic issues.  The IDR process and associated consideration will need to be appropriately documented as part of having adequate systems to demonstrate compliance.

ASIC stated in the House of Representatives Economics Committee this week that these requirements will considerably reduce future remediation programs.

Trustees should be careful not to adopt a “set-and-forget” tactic with their IDR policy and will need to comply with their policy and monitor their compliance on an day-to-day basis.

A particular area that some Trustees will need to consider is their interaction with social media, to the extent that as technology develops the Trustees may be said to be in control of a ‘page’ on which people might express a complaint. Such pages will have to be monitored and appropriate complying responses made.  The records keeping and analysis requirements will have to be met.

There is generally an exception from the requirement of a response if a complaint is resolved to the complainant’s satisfaction or an explanation and/or apology is given if no further action to reasonable address the complaint is possible.  This does not apply to decisions by superannuation trustees. Seemingly trivial interactions at call centres or in social media pages of Trustees will attract the full set of IDR process requirements.

Facebook and Twitter

Let’s say an aggrieved member of the hypothetical “Social Super Fund” were to make a post expressing their dissatisfaction with Social Super Fund’s recent poor investment returns or treatment by the call centre staff on the Social Super Fund official page. Paragraphs marked enforceable in RG 271 would categorise this as a complaint, and the Trustee would be expected to follow-up accordingly.

If you were to transpose this same example to Twitter, except as the aggrieved member cannot post on their page, they instead tag the Social Super Fund (using the “@” function), we think the answer is the same because the complaint is being made to the Trustee.  By putting @, the user is raising a communication directed at and received by the Trustee. This is despite being able to make an argument that the aggrieved member might not have ever visited the fund page and as such did not post “on a social media channel or account owned or controlled by the [Trustee].” Our interpretation is that this will still be a complaint as the Trustee is notified of the tweet and it is the key function enabling users to publicly interact with another specific user or “page” on Twitter, and we suspect RG 271 was drafted to be broadly applicable across social media platforms.

If someone were to post about the hypothetical “Social Super Fund” on their personal Facebook or Twitter page, then other users they are connected with or following them, respectively, may see it while scrolling through their newsfeed. Now, if they were to add some hashtags like #superannuation or even #SocialSuperFund, there is a chance that the trustee may also see it if this particular Trustee is vigilant in its monitoring of social media channels. While a Trustee may employ this vigilance for marketing purposes, ASIC “do not expect financial firms to seek to identify complaints on third party social media accounts or channels”. Therefore, we think a mere “#” rather than an “@” or a post directly on the Trustee’s page, will not be required to be treated as a complaint.

A complaint need only be responded to if the complainant is identifiable and contactable.  A person might post under an alias.  If a Facebook user “John Smith” posts complaints about Social Super Fund on the Fund’s page then the Trustee may respond if they can on the basis it is a complaint.  If however it is not considered appropriate or possible to respond as a complaint without further information identifying John Smith as a member, then in accordance with ASIC’s guidance to be proactive the prudent course of action for its Trustee would be to attempt to confirm that they are a member of the fund by seeking further information such as their member number, full name, date of birth or address. As the requirements only apply to superannuation fund members (or retail clients), if “John Smith” is unresponsive or is unable or unwilling to provide suitable information for the Trustee to confirm “his” membership, then what might have been a potential complaint will not be a complaint as the person is not identifiable.

If a person were to communicate dissatisfaction without identifying how they can be contacted other than via the author’s social media account, and then close their account, it may mean they are uncontactable at least if an attempt was made to try to identify the person and proactively check with members who seem that they may be that person.

In all communications with actual or potential complainants, care should be taken in communicating personal information over social media in light of the requirements to safeguard privacy.

A Trustee will only be expected to follow up with an expression of dissatisfaction if the author expressly or implicitly requires a response. ASIC says that implicit expectation of a response will be where the author has written their post in such a way that implies they reasonably expect the subject of their complaint to respond or take specific action. As such, one might hope that a sole tweet expressing “@SocialSuperFund sucks!!!” does not reasonably require a follow-up and so is not a complaint for the purposes of IDR.