Quick Facts
Overview
The Australian Securities and Investments Commission (ASIC) has initiated civil proceedings in the Federal Court of Australia against Mercer Superannuation (Australia) Limited (MSAL), the trustee of the Mercer Super Trust with approximately 950,000 members and $71bn in assets.
ASIC alleges systemic failures in MSAL's compliance with the Reportable Situations Regime under the Corporations Act 2001 (Cth), including inadequate systems for identifying and reporting protracted investigations, failure to report eight specific incidents, and submission of materially false or misleading reports in one case.
The action seeks declarations of contraventions and pecuniary penalties to be determined by the court.
Details of the Case
ASIC's proceedings against MSAL focus on breaches of the Reportable Situations Regime, a regulatory framework requiring financial services licensees to report certain situations to ASIC, such as significant breaches of core obligations or investigations lasting over 30 days.
MSAL is accused of lacking adequate systems from 1 October 2021 to 30 September 2024 to identify, track, and report such investigations, contravening sections 912A(1)(a) and (c) of the Corporations Act. This resulted in unreported or untimely reports for eight investigations.
Additionally, in one instance (INC-0011906), MSAL allegedly submitted three false or misleading reports to ASIC, breaching section 1308. MSAL outsourced compliance functions to its parent company, Mercer (Australia) Pty Ltd (MAPL), but remained responsible for compliance.
The Mercer Incident System, comprising documented policies, a Governance, Risk and Compliance (GRC) database called "Scout," and manual processes, was deficient in providing clear guidance on investigation commencement dates and reporting triggers, leading to systemic non-compliance.
WORKED EXAMPLES
FAILURE TO REPORT PROTRACTED INVESTIGATION (INC-0011906)
The investigation commenced no later than October 2021 but was not reported to ASIC within 30 days, continuing protractedly. MSAL later submitted reports on 27 October 2023, 10 May 2024, and 15 November 2024, which ASIC alleges were materially false or misleading due to inaccurate statements, leading to a breach of section 1308(4) or (5).
In updates dated 27 October 2023, 10 May 2024, and 15 November 2024 for this incident, statements were allegedly false, such as misrepresenting the nature or extent of the breach. This led to contraventions of section 1308, with potential impacts on ASIC's ability to detect non-compliant behaviors early.
Non-Reporting of Incident INC-0013541
Identified as a reportable situation, this investigation lasted over 30 days without notification to ASIC. It exemplifies MSAL's deficient tracking in the GRC Database, where initial assessments flagged potential compliance impacts but failed to trigger timely reporting under section 912DAA.
Delayed or Absent Reporting for INC-0017604
This case involved gathering further information post-initial assessment, marking the start of an investigation that exceeded 30 days. ASIC alleges MSAL knew or was reckless about reasonable grounds for belief in a reportable situation but did not notify within the required timeframe, contributing to broader systemic failures across periods from October 2021 to September 2024.
Breach in Compliance Assessment for INC-0017236
Assessed for potential regulatory impact, this incident required escalation to the Significant Incident Review Panel (SIRP) but was not reported. It highlights deficiencies in manual processes, where weekly team discussions and spreadsheets failed to ensure consistent identification and reporting.
Fines and Penalties
The total fine amount is to be determined by the court. ASIC seeks pecuniary penalties under section 1317G of the Corporations Act for contraventions of:
- Sections 912A(1)(a) and 912A(5A) (failure to provide services efficiently, honestly, and fairly).
- Sections 912DAA(1) and 912DAA(7) (failure to report reportable situations).
- Sections 1308(4) or (5) (false or misleading statements in reports).
Key Quotes
"This proceeding concerns failures by the defendant (MSAL) to comply with the Reportable Situations Regime. The regime is a cornerstone of Australia’s financial services regulatory structure that allows ASIC to detect significant non-compliant behaviours early, and take action where appropriate."
"During the period between 1 October 2021 and 30 September 2024 (Relevant Period), MSAL failed to have in place an adequate system to comply with its obligations under the Reportable Situations Regime to report protracted investigations to ASIC, in breach of sections 912A(1)(a) and (c) of the Corporations Act 2001 (Cth) (Act)."
"As a result of MSAL’s deficient system, MSAL failed to report eight investigations to ASIC in the time required by the Act or at all, in breach of sections 912DAA(1) and (7) of the Act."
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