APRA grilled on Aware Super remediation payments

Committee member and Liberal MP Jason Falinski picked up his colleague Tim Wilson’s line of questioning at a recent hearing of the committee, grilling APRA as to whether it believed fines for breaches of advice laws were paid for by members of industry fund Aware Super, then known as First State Super.

“If you fine AMP or a retail super fund, their shareholders pay for it. Talk me through the case of First State Super, which is now Aware Super, when they had a situation where they were fined for financial advice that they were providing. Who paid those fines? Was it paid by the members or by the shareholders?” Mr Falinski asked.

The comments follow Mr Wilson’s questioning of ASIC around the case of Aware Super at a hearing of the committee in March, where commissioner Danielle Press said the appropriateness of the fund’s apparent use of member reserves to pay remediation costs was “a matter for APRA”.

In response to Mr Falinski’s question on notice, APRA said the case concerned “the payment of remediation to members by StatePlus rather than payment of a fine imposed by a regulator”.

StatePlus, which was purchased by Aware Super in 2016, had undertaken “a process to identify affected members relating to its fee-for-no service issues”, APRA said.

“Once identified, these members were remediated by StatePlus with the funding for the payment being sourced from StatePlus’ retained profits, i.e. its own financial resources,” the regulator said.

“We are unaware of any fines having been imposed on StatePlus or Aware Super that were paid for by Aware Super, whether through the exercise of any right of indemnification from the fund or otherwise.”

The prudential regulator sought to draw a distinction between a fine and remediation in the case, arguing that StatePlus had sought to correct “an error” rather than having been found to have breached its obligations.

“In general terms, a fine is imposed on a regulated entity by a regulator in relation to a breach of a law,” APRA said.

“Remediation however broadly refers to a payment made to address any loss suffered by a member as a result of an error or other failure that occurs, including from an external event) in the course of operating a fund.”

However, APRA further noted that ASIC was currently pursuing civil penalties against StatePlus as a result of fees for no service over a five-year period, and that the matter was “ongoing”.